AM I ELIGIBLE FOR A CONVENTIONAL MORTGAGE? – The Florida Star
In today’s market, cash offers are leading the pack, but offers submitted with a conventional loan pre-approval are their stiff competition. Conventional loans are originated, guaranteed and serviced by private mortgage lenders such as banks, credit unions and other financial institutions.
Conventional loans are divided into conforming and non-conforming loans, depending on whether they meet guidelines set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), the two mortgage companies backed by the government who own many mortgages in the United States
It is possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may seek a score of 660 or higher. You can find conventional mortgages with a down payment requirement as low as 3%, and some lenders have special programs that offer up to 100% financing. However, if you don’t put down 20% or more, the lender usually asks you to pay for private mortgage insurance. Conventional loans are generally repaid over 30 years, but it is possible to qualify for a conventional 15 or 20 year mortgage. You can get a fixed rate loan or an adjustable rate loan. Your interest rate will largely depend on your credit score and your overall credit history. The better your credit, the less interest you will pay over the life of the loan.
If you’re trying to decide between a conventional loan and a government-insured loan, which one is right for you depends on your financial situation. Although government-backed loans offer advantages if you don’t have great credit or a large down payment, getting one isn’t always easy. Plus, you can save more money with a conventional loan if you have good credit or can save more money. Compare the different options and their pros and cons to find the loan program that’s right for you.
Some of the benefits you will get from a conventional loan are, a high credit score can help you qualify for a low interest rate. Plus, you can request the removal of the insurance requirement once your loan-to-value ratio reaches 80%, higher loan limits, and flexibility.
If you’ve decided a conventional loan is for you, check your credit score to see if it’s 620 or higher, save for your down payment, check your debt ratio, research mortgage lenders, or contact your trusted realtor who should be able to recommend lenders and then get pre-approved. Your mortgage pre-approval letter will be forwarded to your real estate agent and once the home search has begun, it will be submitted with offers made on the properties of your choice.
My suggestion to home buyers in today’s market would be to check if you qualify for a conventional loan on FHA if the property needs work, as conventional loan inspections are not as strenuous as FHA or VA inspections. Bearing in mind that it is the inspections and valuation contingencies that will excite the seller when he also has a cash offer in front of him. The conventional loan will give them the comfort they need to choose your offer over a cash offer.
As always, call me or your trusted real estate agent with questions or concerns, or when you’re ready to buy.
Dana Lewis, Realtor
eXp Realty, LLC
A question, a need or a real estate concern? …”You can count on Dana”