Unlike government-backed loans, such as FHA or VA loans, conventional loans adhere to guidelines set by entities like Fannie Mae and Freddie Mac. For homebuyers, this means a smoother approval process based on credit scores. Borrowers with good credit can enjoy flexible down payment options, lower closing costs, and competitive interest rates. While a lower credit score won’t disqualify you from a conventional loan, it may require different conditions, such as a higher down payment.
Qualified borrowers can secure their loan with a down payment as low as 3%
Conventional loan term options include 15 or 30-year length loans and fixed or adjustable-rate mortgages.
The conventional loan has fewer fees to close in comparison to government-sponsored loans.
Conventional loans adhere to the guidelines set by Fannie Mae and Freddie Mac, ensuring transparency and reliability. With no hidden fees or penalities, you get a simple, affordable mortgage. Enjoy the peace of mind that comes with a stable monthly payment.
Choosing between a conventional loan and an FHA loan depends on your unique situation and homebuying needs. Conventional loans often offer lower interest rates and more flexibility but require stronger qualifications. FHA loans are easier to qualify for, especially for borrowers with lower credit scores, but they come with stricter terms and potentially higher costs.
The lowest down payment required for a conventional loan is typically 3% but this depends on your financial situation. Lenders may require more based on your debt-to-income (DTI) ration and credit score. Additionally, the size of your down payment affects your monthly payment. A down payment of less than 20% will require your to pay private mortgage insurance (PMI), which adds to your monthly costs.
The approval time for a conventional home loan depends on how quickly you and your lender can communicate and submit the necessary documents. It’s crucial to choose a reliable and transparent lender. Typically, the approval process takes between 30 to 60 days, but it can be longer depending on your buying situation.
Typically, the maximum debt-to-income (DTI) ratio a lender will accept for a conventional loan is 45-50%.
Yes, there are many options available for refinancing a conventional loan. Typically, it’s recommended to have at least 20% equity built up before refinancing. Some lenders may have specific rules about when you can refinance if you originally used them to buy the house. Borrowers can apply for a rate-and-term refinance to lower monthly payments and secure a better interest rate, especially if their financial situation improves after purchasing the home. Additionally, a cash-out refinance option allows you to tap into your homes equity for a lump sum payout for major expenses.