Conventional Loans

A conventional loan is a type of loan that doesn't have government backing or insurance, unlike FHA, VA, and USDA loans, which are insured by the government. Conventional mortgage loans, whether conforming or non-conforming, usually require a slightly larger down payment than some government loans. However, conventional loans offer more flexibility and fewer restrictions for borrowers, especially those borrowers with good credit and steady income.

Conventional loans offer several advantages. They often have more flexible terms and lower interest rates than government-backed loans. Conventional loans also allow for higher loan amounts, making them suitable for financing higher-priced homes.

It's possible to obtain a conventional mortgage loan with a down payment as low as 3%. While conventional loans traditionally require a larger down payment, some borrowers may qualify to purchase a home with a 3%-5% down payment. Keep in mind that a lower down payment may result in additional costs, such as private mortgage insurance (PMI).

To qualify for a conventional loan, you need a credit score above 640, a stable employment history, and a manageable debt-to-income ratio. Other factors, such as your income, assets, and the property's appraisal value, will also be considered. Specific requirements may vary, so it's essential to consult with us to determine your eligibility.

Conventional loans can be an excellent choice for many homebuyers. They often offer competitive interest rates, term flexibility, and the ability to finance various property types. However, whether a conventional loan is the best option depends on your financial situation, credit history, and preferences. It's always a good idea to explore multiple loan options and consult with us to determine the best fit for your needs.

The timing for refinancing an FHA loan into a conventional loan depends on several factors. In most cases, you can refinance an FHA loan into a conventional loan once you have built enough equity in your home. Typically, this means reaching an 80% loan-to-value (LTV) ratio. However, specific requirements may vary, so it's important to discuss your options with us and allow us to guide you through the process.

There are several options available to help cover closing costs with your conventional loan:

  • Ask the seller for "seller concessions" to help pay your closing costs. You can negotiate this into your contract when purchasing a home. Let your real estate agent and us know if you plan to ask for seller concessions. 
  • Consider paying a higher mortgage interest rate in exchange for the lender's assistance covering your closing costs. This is known as "buying up" your interest rate. 
  • Conventional home loan programs allow gift money from family members, employers, etc. to help with closing costs. Let us know if you plan for use gift money and we will inform you on what is needed. 
  • Consult with us to see if any applicable down-payment assistance programs are available to you. 

    It's possible to obtain a conventional loan if you owe taxes, but it depends on several factors. First, it's important to understand the difference between owing taxes and having a tax lien. Owing taxes means you owe money to the IRS and/or a state, while a tax lien occurs when your unpaid taxes result in collection actions. Having an IRS lien on your income or assets can significantly decrease your chances of being approved for a conventional mortgage.

    Communicate openly with us if this applies to you so we can help guide you through the loan application process and help you explore potential solutions or alternatives.

    Higher Loan Limits: Conventional loans generally offer higher loan limits compared to FHA loans. This can be beneficial if you are looking to finance a more expensive property or live in a high-cost area, as it allows you to borrow a larger amount.

    No Upfront Mortgage Insurance: Unlike FHA loans, Conventional loans do not require upfront mortgage insurance premiums. This means you can save on the upfront costs associated with the loan and potentially lower your overall loan amount.

    Flexible Mortgage Insurance Options: With a Conventional loan, once you reach a loan-to-value (LTV) ratio of 80% or less, you have the option to cancel private mortgage insurance (PMI) or request its removal. This can result in significant savings over time compared to FHA loans, which require mortgage insurance for the entire life of the loan.

    More Lenient Property Standards: Conventional loans generally have more flexibility when it comes to property condition and appraisal requirements. FHA loans have stricter property standards, which could limit your options when purchasing a home that requires repairs or renovations.

    It's important to note that both loan types have their own advantages and disadvantages, and the right choice depends on your specific financial situation and goals. We will help you evaluate the options and determine the best fit for your needs!