Types loans and chosing the best

What is a Conventional Loan?

By definition, a conventional loan is any mortgage that is not guaranteed or insured by the federal government. A conventional loan is generally referring to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE's) like Fannie Mae or Freddie Mac. Conventional loans may be either “conforming” or "non-conforming". Conforming loans follow the terms and conditions set by Fannie Mae and Freddie Mac. Nonconforming loans don't meet Fannie Mae or Freddie Mac guidelines, but they are also considered conventional. Whether you're buying a home or want or refinance your mortgage, a Conventional Loan might be right for you. 

What are the Conventional Loan Requirements?

To decide if you qualify for a Conventional Mortgage Loan, we will look at:

• Your income and your monthly expenses. Standard debt-to-income ratios are 28/36 for Conventional Loans. These ratios may be exceeded with compensation factors.
• Your credit history (this is important, but Conventional's credit standards are flexible). A FICO score of 620 or above is very helpful in obtaining an approval.
• Your overall pattern rather than to individual problems you may have had.

To be eligible for an Conventional mortgage, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (28% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is required to obtain an Conventional approval. You must also have enough income to pay your housing costs plus all additional monthly debt (36% ratio). These percentages may be exceeded with compensating factors.

What are the Conventional Down Payment Requirements?
Conventional Loans require the home buyer to invest at least 5% - 20% of the sales price in cash for the down payment and closing costs. If the sales price is $100,000 for example, the home buyer must invest at least $5,000 - $20,000.

What will be my Interest Rate?

The interest rate for your home loan will be determined by the type of loan program that you qualify for and your credit score. You might be asking yourself what the formula to calculate interest rates is. Interest rates are driven off of Mortgage Backed Securities (MBS) which are commonly referred to "mortgage bonds". These values of these bonds determine whether the interest rates rise or fall. Your final rate will determine your payment using the standard calculate mortgage payment formula. Please contact one of our loan officers to see what is today’s lending mortgage rate.

What types of property are eligible?

While Conventional Mortgage Guidelines allow you to purchase warrantable condos, planned unit developments, modular homes, manufactured homes, and 1-4 family residences. Conventional Loans can be used to finance primary residences, second homes and investment property.

Can I get a Conventional Mortgage Loan after bankruptcy?

Criteria for Conventional loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for four years or more, you are eligible to apply for an Conventional mortgage. If you have had a Chapter 13 bankruptcy, it must be documented that the your credit reputation has been re-established for at least two years to be eli bible for a Conventional Loan Application.

What is the maximum amount that I can borrow?
The maximum amount for an Conventional Mortgage Loans are determined by:

Maximum loan amount: The maximum loan amount allowed for an Conventional Conforming Loan varies from county to county. To see what the limit is in the county in which you're interested, visit the following site ttps://www.efanniemae.com/sf/refmaterials/loanlimits/. 

This site lists U.S. territories as well as states.

Maximum financing: Depending on the state where the property is located, the maximum Conventional Mortgage amount will be 80% - 95% of the appraised value of the home or its selling price, whichever is lower.

What Kinds of Loans do Conventional Programs Offer? 

Fixed rate loans - Most Conventional Mortgages are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same for the entire loan period. With a fixed rate Conventional Mortgage, you always know exactly how much your monthly payment will be. Contact us for today's free Conventional mortgage rates.

Adjustable rate loans - With a conventional adjustable rate mortgage (ARM), the initial interest rate and monthly payments are low, but these may change during the life of the loan. Conventional Loans mainly use the Constant Maturity Treasury Index (CMT) or the London Interbank Offered Rate Index (LIBOR) to calculate the changes in interest rates. Conventional ARMS are offered with initial fixed rate periods of 3 years, 5 years, 7 years and 10 years.

• Conventional Mortgages are ideal for borrowers with excellent credit and a substantial down payment.
• Conventional Loans use income expanded qualifying ratios.
• There are no prepayment penalties for an Conventional Conforming Mortgage.
• A Conventional Loan can be used for the purchase of a Primary Residence, Second Home or Investment Property.
• A Conventional Mortgage is available all areas of the country, provided a market exists for the property and the home meets minimum property standards.
• A Conforming Loan may be used to purchase or refinance a new or existing one to four family home in urban and rural areas, including manufactured homes on permanent foundations.
• Conventional Mortgages are offered at terms of 10, 15, 20, 25, 30 and 40 years. The terms of 15 and 30 years often carry the lowest interest rates.

·         Home Loan Comparison

·         What home loan options are available for my circumstances?

Conventional Loans - Ideal for Borrowers with Excellent Credit and a Substantial Down Payment
Conventional Home Purchase Loans are more credit score driven than other loan types and at least a Conventional Loan guidelines are currently written in a way that a borrower with a 740+ credit score can usually obtain the best interest rate possible. As a borrowers credit score decreases below a 740, sizable fees and rate increases could be added, in excess of the 1-2 percent range. If your credit score is less than perfect, an FHA Loan, USDA Loan or VA Loan could be the best home loan for you.

FHA Loans - Could be the Best Home Loan for Borrowers who have Less Than Perfect Credit and a Small Down Payment  FHA new home purchase loan requirements are not totally credit score driven. FHA mortgage guidelines are written in a way that provides the borrower the benefit of the doubt that there had been, at some point in their past, circumstances beyond their control, and as long as the borrower has recovered from those circumstances in a reasonable manner, they're generally going to be credit-eligible for an FHA mortgage.

USDA Loans - Could be the Best Home Loan for Those who have Less Than Perfect Credit and a No Down Payment
USDA Mortgages have no down payment requirement. Other house loan programs don't allow this. Another distinct advantage of a USDA loan to purchase a home, as compared to a conforming loan, is great interest rates and no mortgage insurance (MI). In general a 620 FICO score is required to obtain a USDA loan approval,

·         VA Loans - Could be the Best Home Loan for Veterans of the US Armed Services VA Home Purchase Loans in recognition of the contributions and sacrifices veterans have made for America. VA Loans require no down payment and no mortgage insurance. In general a 620 FICO score is required to obtain a VA loan approval. 

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Learn more about Conventional Loans, FHA Loans, VA Loans and USDA Loans.

·         How do I choose the best home loan for my situation? Choosing home mortgage loans is a very personalized process.