Whether you are a First Time Home Buyer, purchasing a Second Home or in the market for an Investment Property, there is no denying that the thought of figuring out the financing and which loan is best for you, can feel overwhelming.
The lack of mortgage loan knowledge and how it works is terrifying. But, what if we told you that choosing a mortgage is not as painful as you may think. Your first step is to speak with a trustworthy and experienced Mortgage Lender that will guide you through every step and help you understand the process. Such as, completing the application, reviewing your credit, understanding what program is best for you, see what down payment amount is required and the home value that you should consider to fit your budget. The mortgage lender will help you choose a loan that works best for your needs.
In this article, we are going to explain what is the benefits and advantages of a Conventional Mortgage Loan.
A Conventional Mortgage is not insured or guaranteed by the federal government. The Conventional Mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate. The two types of Conventional Mortgages are: Conforming Loans and Non-Conforming Loans.
What is the difference of Conforming Loan and a Non-Conforming Loan?
- Conforming Loans is when a loan amount falls within the maximum limits set by Fannie Mae or Freddie Mac. government agencies that back most U.S. mortgages. Loans that do not meet these guidelines are considered Non-Conforming Loans.
Is a Conventional Home Loan right for me?
Let’s look at the pros and cons of a conventional mortgage.
- Conventional Home Loan can be used for a primary home residence, second home, and an investment property.
- Borrowing costs is lower than other types of mortgages, even if the interest rate is higher.
- You can ask your lender to cancel PMI once you gain 20% equity.
- You can pay as low as 3% down payment.
- You need credit. Must have a “minimum” FICO score of 620 or above.
- Debt-to-income ratio should be 45-50%.
- Must pay PMI if your down payment is less than 20% of the sales price.
- Significant documentation required to verify income, assets, down payment and employment.
You should consider a Conventional Mortgage if you have:
- Strong Credit
- Stable Income
- Employment History
- Down Payment of at least 3 percent. (Ideally 10-20 percent)
How do you qualify for a Conventional Loan?
The first step is to consult with a Lender. If you are planning on purchasing a home, call The Mortgage Specialist today for a consultation!
Be prepared to provide the following:
- Recent Pay Stubs
- Tax Returns
- Bank Statements
- … and other Financial Information.
If you are wondering why a lender asks for all of your financial information, it is to ensure you have a stable income and can prove that you can make your monthly mortgage payments. It’s not sufficient just to say you make enough … you need to provide documents to support it.
Additionally, you will need a down payment to qualify. Some buyers will be able to put as low as 3% down. However, we do recommend that you put a higher down payment, if possible. Such as, 10-20 percent down. The higher down payment you apply towards your loan, such as 20% or higher, you will avoid paying PMI.
What is PMI?
Private Mortgage Insurance. It is required to pay for PMI when you get a Conventional Home Loan. The PMI protects the lender for at least some of the shortfall if the home is sold in foreclosure at less than the outstanding amount of the mortgage. PMI is generally required if you refinance your mortgage with less than 20 percent equity.
Why are Conventional Loans so popular?
Well, it’s simple! It benefits many people. With a Conventional Home Loan, you get:
- Low Interest Rates
- Fast Loan Processing
- Down Payment as low as 3 percent
- Fixed-Rate Mortgage Terms ranging from 10 to 30 years
- Reduced PMI. (could avoid PMI if you have at least 20% equity)
Are you in the market for a Home Loan and would like to discuss your options with an experience Lender? The Mortgage Specialist is waiting for you! Call today at (954) 770-0626 or email firstname.lastname@example.org.
Ready to get started but want to see if you pre-approve. No problem! Fill out our application online and The Mortgage Specialist will contact you to proceed.