A Kansas conventional loan is any mortgage which is not guaranteed or insured by the federal government.
There are a number of advantages that conventional loans could present to prospective borrowers, some of which are listed here:
- Lenders may be willing to keep the loan in their own lending portfolio, thus allowing more underwriting flexibility because the loan will not have to meet secondary market guidelines.
- If a borrower has difficulty obtaining Private Mortgage Insurance (PMI), the lender may self-insure the loan, increasing the interest rate of the loan to compensate for its greater risk.
- For the cash-short borrower, the lender may be willing to fund a portion of the closing costs in exchange for a higher loan interest rate.
However, conventional loans may also pose some disadvantages, including:
- Conventional loans generally require a larger down payment than government-backed loans.
- Interest rates are set by each lender and can exceed those of FHA and VA loans.
- Origination fees and other costs are also determined by individual lenders and may therefore be higher than those of other programs.
- Loans with greater than an 80 percent loan-to-value (LTV) ratio will require the borrower to purchase Private Mortgage Insurance.
The lender may not allow some creative financing options for the buyer.
The rules regarding what a lender can and can't do in conventional mortgage lending is determined by the loan's ultimate destination.
A lender who wants to sell loans to the secondary market has one set of rules that must be adhered to.
If the borrowers require PMI, another set of rules have to be applied.
Because a majority of all conventional loans are sold to the secondary market, those guidelines have become the general standard for Kansas conventional mortgages.
There are a number of advantages that conventional loans could present to prospective borrowers, some of which are listed here:
- Lenders may be willing to keep the loan in their own lending portfolio, thus allowing more underwriting flexibility because the loan will not have to meet secondary market guidelines.
- If a borrower has difficulty obtaining Private Mortgage Insurance (PMI), the lender may self-insure the loan, increasing the interest rate of the loan to compensate for its greater risk.
- For the cash-short borrower, the lender may be willing to fund a portion of the closing costs in exchange for a higher loan interest rate.
However, conventional loans may also pose some disadvantages, including:
- Conventional loans generally require a larger down payment than government-backed loans.
- Interest rates are set by each lender and can exceed those of FHA and VA loans.
- Origination fees and other costs are also determined by individual lenders and may therefore be higher than those of other programs.
- Loans with greater than an 80 percent loan-to-value (LTV) ratio will require the borrower to purchase Private Mortgage Insurance.
The lender may not allow some creative financing options for the buyer.
The rules regarding what a lender can and can't do in conventional mortgage lending is determined by the loan's ultimate destination.
A lender who wants to sell loans to the secondary market has one set of rules that must be adhered to.
If the borrowers require PMI, another set of rules have to be applied.
Because a majority of all conventional loans are sold to the secondary market, those guidelines have become the general standard for Kansas conventional mortgages.
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