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Lili Liu  Nmls#382645
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Is Conventional Loan the right type for you?
 

A conventional or conforming mortgage loan is type of loan that is not insured or guaranteed by the federal government.  A conforming conventional loan follows the guidelines as set forth by Fannie Mae and Freddie Mac.

Conventional mortgages may be fixed-rate or adjustable-rate mortgages. In fact, this mortgage loan type adheres to guidelines that are specifically set by Fannie Mae and Freddie Mac.  Most conventional loans require a down payment of 3%. For cash out Conventional financing, a borrower will be allowed to take out up to 80%-85% of your home’s value.

 

Conventional loans can have better interest rates than non-conventional loans and can be a great option for those with a 20 percent down payment.  However, even if the borrower does not have a 20 percent down payment, it is still possible to get a mortgage.  By putting less down and accepting a private mortgage insurance (PMI) or a higher rate without PMI, the borrower can still get financing through a conventional loan.
 

You can submit documents for pre-approval which helps you determine what you can afford to borrow. Pre-approval is based on what you provided on income/assets/credit information and normally valid for 3 months.  If you decided to put less than 20% down, you will be required to pay PMI (private mortgage insurance) or choose a slightly higher interest rate with lender paid mortgage insurance. For example, a $100,000 home with a $90,000 mortgage has a 90 percent LTV. The PMI Company provides insurance to the lender for the mortgage loan balance over 80%.

 

What are the conventional loan requirements?

Most lenders require a credit score of at least 620 in order for you to be eligible for a conventional loan. Additionally, you shouldn’t have a debt-to-income ratio that exceeds 45%.
 

What down payment is required for a conventional loan?

With a conventional loan, you must put down at least 3% of the sales price but it is generally recommened to put down 20%. If you don’t put down 20% of the home’s price, you will have to pay private mortgage insurance (PMI) until you have reach 80% equity in the home and can refinance.
 

What types of properties are eligible for conventional loans?

Condos, modular homes, second homes, investment properties, primary residences, planned unit developments, manufactured homes and 1-4 family residences are all eligible for conventional loans.
 

What are the typical closing costs associated with conventional loans?

Closing costs will typically cost you anywhere from 3% to 6% of the home’s total price. Conventional loan closing costs normally include loan discount fees, title services, lender fees, the appraisal, credit report fees and other miscellaneous fees.

 

 

Purchase

Purchasing a home is probably one of the biggest investments you'll ever make in your lifetime we are here to help.
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Refinance

We can help you lock in a long term fixed rate or refinance and get cash out.
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FHA loans

There are lots of good reasons to choose an FHA loan.
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