Conventional mortgages are the most popular and common type of mortgage for homebuyers, but it is important to know what your options are when concerning which type of mortgage is best for you.
What Is a Conventional Mortgage?
A conventional mortgage is funded through your lender and is not backed by a government agency, such as the Federal Housing Administration, Department of Veterans Affairs, or the Department of Agriculture.
Fixed-Rate vs. Variable Rate
A fixed-rate mortgage has an interest rate that is locked in when you obtain a loan. Some homebuyers prefer these because both their interest rate and monthly payments will not change, which offers predictability.
A variable-rate mortgage, also known as an adjustable-rate mortgage (ARM) has an interest rate that will be set for a period of time, with annual adjustments based on market rates. For example, if you have a 5/1 ARM your initial interest rate will be set for five years, with annual adjustments each year after.
Variable-rate mortgages often start with a lower interest rate than a fixed-rate mortgage, but that could change as interest rates fluctuate over time.
Some homebuyers prefer the predictability of a fixed rate mortgage, while others opt for an adjustable-rate mortgage if they can obtain a lower starting interest rate and hope that market rates will decline before their first readjustment, or they plan to sell their home before the readjustment happens.
Union Bank Conventional Home Loan Programs
At Union Bank of Mena, we help homebuyers secure home mortgage loans with down payments starting at 3%. We can help you consider all your options and explain the process of how to apply for a mortgage.
If you’re not sure where to start, or which mortgage is right for you, just contact us online or visit one of our 10 branches in West Central Arkansas and the River Valley: Mena, Paris, Wickes, Hatfield,
Caulksville, Clarksville, Ozark, Waldron, Booneville, and Russellville.