What is a Conventional
Home Loan?
Whether you’re a first-time home buyer or looking to refinance your existing mortgage, our conventional loan program offers flexibility and stability to suit your needs. Read on to learn more about this popular mortgage option.
A conventional loan is a type of mortgage that is not insured or guaranteed by any government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, conventional loans are backed by private lenders and follow guidelines set by two government-sponsored enterprises: Fannie Mae and Freddie Mac.
Key Features and Benefits:
- Flexibility: Conventional loans offer a wide range of options to borrowers. Whether you’re purchasing a primary residence, a second home, or an investment property, a conventional loan can accommodate your needs. Additionally, you can choose from various repayment terms, including fixed-rate and adjustable-rate options.
- Loan Amounts: Conventional loans are known for their higher loan limits compared to government-backed loans. This makes them a great choice if you’re looking to finance a higher-priced property.
- No Mortgage Insurance Premiums (MIP): One of the significant advantages of conventional loans is that they don’t require upfront or ongoing mortgage insurance premiums, provided your down payment is 20% or more of the purchase price. This can result in substantial savings over time compared to FHA loans, which require mortgage insurance regardless of the down payment amount.
- Competitive Interest Rates: With a conventional loan, you can often secure competitive interest rates based on your creditworthiness and financial profile. This can result in lower monthly mortgage payments and potentially save you money over the life of the loan.
- Streamlined Refinancing: If you already have a conventional loan, you can take advantage of the streamlined refinancing options available. Refinancing can help you lower your interest rate, reduce your monthly payments, or change the term of your loan to better align with your financial goals.
Eligibility Requirements:
- Good Credit Score: Lenders typically look for a credit score of 620 or higher to approve a conventional loan. However, having a higher credit score can improve your chances of securing a lower interest rate.
- Stable Income and Employment: Lenders evaluate your employment history and income stability to ensure you can meet your mortgage obligations. Generally, they prefer borrowers with a steady employment record and consistent income for a minimum of two years.
- Debt-to-Income Ratio: Lenders consider your debt-to-income ratio, which is the percentage of your monthly gross income that goes toward paying debts. Most lenders prefer a debt-to-income ratio of 45% or lower, although some may be flexible depending on other factors.
- Down Payment: Conventional loans allow for a down payment as low as 3%. With this 3% down payment, there are specific programs that also allow for lower monthly mortgage insurance. To avoid monthly insurance, a 20% down payment is required.
At AmCap Home Loans, we specialize in helping individuals and families navigate the conventional loan process with ease. Our team of experienced professionals is here to assist you with any questions you may have about the Conventional Loan program. We’re dedicated to helping you navigate the path to homeownership and find the financing solution that best suits your needs. Contact us today to get started on your journey toward owning your dream home.
