Introduction To Conventional Loans
Conventional Mortgage Loans are mortgage loans offered by non-government sponsored lenders. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate.
Benefits Of A Conventional Loan
Conventional Loans do NOT have any funding fees associated with them, and often typically can have other fees such as underwriting or appraisal fees that are lower than some other government backed loans. They also can have mortgage insurance rates that can be lower than government mortgage insurance rates depending upon credit score, and the mortgage insurance rates typically go away when the borrowers LTV goes to 80% (if the borrower contacts the servicer and asks for the MI to be removed) or automatically goes away at 78% LTV.
Some conventional loan programs can have a 3% down payment, compared to a 3.5% down payment on an FHA loan. These 3% down payment programs differ by geographic area, but they also can typically come with a slightly lower interest rate than a more typical 5% or 20% down conventional program. With the lack of up front funding fee and slightly lower down payment amount, this is the conventional alternative to an FHA loan, and, for qualifying borrowers can be a real advantage in the marketplace.
Conventional Loan Eligibility And Requirements
Conventional loans are typically chosen by individuals with higher credit scores, as their pricing tends to be more exclusive to people with high credit scores. Typically, a score of 740 will lead to the best possible pricing, while every tier below that pricing will lead to more costs, a higher interest rate, or both. Scores significantly below median credit can still qualify, at times, for a conventional loan, but typically the pricing differential becomes great enough that a borrower might find it more advantageous to take on a different kind of loan.
Conventional loans DTI’s can range anywhere from 42-49% of a borrowers adjusted gross income.
Credit history and score, along with down payments, reserves and many other factors all can affect the borrowers ability to qualify as well.
Mortgage Insurance Premium
Conventional loans do not require mortgage insurance if the borrower puts down a 20% down payment.
A conventional loan where the loan to value of a property is lower than 80% will see the mortgage insurance leave the property
A conventional loan where the borrower has excellent credit, or puts down close more than the lowest possible down payment will also, often times, find the borrower pays a smaller amount of mortgage insurance than with a typical FHA loan.
Conventional Loan Limits
These can vary throughout the country by state and metropolitan area, but in Texas the limit is $453,100.00 for 2018
How We Can Help
We do lots of conventional loans for our clients. In fact, it’s probably the most common loan we do for our typical borrower, as the borrowing costs are generally much lower, the borrower doesn’t have to qualify through special circumstances like many government programs, and the interest rates are market competitive.
If you are interested in seeing if you qualify for a conventional loan, and what the terms for that loan might be we strongly encourage you to email us at firstname.lastname@example.org, call me at 832-557-1095 or apply here now!