Improve Your Savings with Conventional Loan Option

You probably need a mortgage loan to help pay for your new home if you’re considering purchasing one.  But, what’s the best option for you?

Homebuyers often choose conventional loans because they have competitive interest rates and no government support. Conventional home loans provide flexibility with down payment options and loan terms, making them ideal for borrowers with consistent income and good cre

Highlights

  • Minimum down payment of 3% a
  • Minimum credit score of 620
  • Cancellation of mortgage insurance at 20% equity
  • Suitable for primary, secondary/vacation, or investment/rental properties.
  • Anywhere can be the location of the property.
  • Accessible to all qualified people, regardless of financial status

Improve Your Savings with Conventional Loan Option​

You probably need a mortgage loan to help pay for your new home if you’re considering purchasing one.  But, what’s the best option for you?

Homebuyers often choose conventional loans because they have competitive interest rates and no government support. Conventional home loans provide flexibility with down payment options and loan terms, making them ideal for borrowers with consistent income and good credit.

Highlights

  • Minimum down payment of 3% a
  • Minimum credit score of 620
  • Cancellation of mortgage insurance at 20% equity
  • Suitable for primary, secondary/vacation, or investment/rental properties
  • Anywhere can be the location of the property.
  • Accessible to all qualified people, regardless of financial status

Why Are Conventional Loans the Best Option?

Conventional home loan have a lot of benefits. They usually have lower borrowing costs, giving you more borrowing power, with fewer fees than government loans.

Services Related To Conventional Loans

 

Did you know? We offer a variety of options beyond conventional loans. Explore the services below!

Conventional Purchase

A Conventional Purchase loan is a traditional mortgage option ideal for homebuyers with good credit and a stable income. With a down payment as low as 3%, this type of financing allows borrowers to purchase their dream home while benefiting from competitive interest rates. Conventional loans provide flexibility and choice, making homeownership more attainable for many buyers.

Conventional Rate & Term Refinance

A Conventional Rate & Term Refinance allows homeowners to lower their interest rates or adjust their loan terms to fit their financial goals. This refinancing option is suitable for those looking to reduce monthly payments, shorten their loan term, or switch from an adjustable-rate to a fixed-rate mortgage. Enjoy potential savings while maintaining the flexibility of a conventional loan.

Conventional Cash-out Refi

A Conventional Cash-Out Refinance enables homeowners to access their home’s equity for cash. This option is perfect for funding major expenses such as home renovations, debt consolidation, or other financial needs. With competitive interest rates and flexible terms, a cash-out refinance allows borrowers to leverage their home’s value while potentially securing a lower rate on their mortgage.

e7ae5c1779

What Are Conventional Loans?

One kind of mortgage that isn’t guaranteed by the government is a conventional loan. Therefore, mortgages backed by the Federal Housing Administration (FHA loans) or the U.S. Department of Veterans Affairs (VA loans) do not qualify as conventional loans.

Conventional loans typically have more strict qualifying standards than mortgages backed by the government; typically, the borrower must have a higher credit score, make a larger conventional loan down payment, and have a lower debt-to-income ratio (DTI).

A variety of mortgage lenders, such as banks, credit unions, and online mortgage companies, offer conventional mortgages.

Interest Rate on Conventional Loans

There are two primary varieties of them: fixed-rate and adjustable-rate.

  • Fixed rates

Your interest rate is always the same. For the duration of the loan, your monthly principal and interest payments will remain the same.

  • Adjustable Rate

The first 3 to 10 years of the loan will have a fixed introductory rate. After that, the rate will fluctuate according to an index rate plus a margin decided by the lender at predetermined intervals, like once a year or every six months.

How Does It Work?

Like most mortgages, conventional loans are interest-only. A borrower applies for a particular loan amount from a lender. After examining the borrower’s credentials, the lender grants the loan. The borrower will make monthly loan payments after the loan gets approved and they close on their new residence.

There isn’t just one set of conventional home loan requirements for borrowers because “conventional loans” encompass a variety of different guidelines. However, compared to government-backed loans such as Federal Housing Administration (FHA) loans, conventional loans typically have more strict credit conventional loan requirements.

Who Qualifies For Conventional Loans?

Conventional loans are most suitable for:

  • Those with steady full-time employment who consistently produce paystubs regularly
  • Self-employed individuals who have earned a constant reliable income for three years or longer
  • married pairs with low debt and a household income ranging from moderate to high

Documents Required For Conventional Loans

The following seven pieces of documentation are required:

  • Your picture ID, such as your driver’s license
  • pay stubs from the previous pay period (if you work as a W2)
  • The last two years’ tax returns
  • documentation outlining your plan for making the down payment
  • A balance sheet that displays both assets and liabilities
  • Your lender will order your credit report.
  • An evaluation of the asset borrowed against
How it works

Conventional Loan Requirements

You must satisfy the lender’s requirements regarding your financials, including your debts, income, and credit score,  to get approved for any kind of mortgage. Conventional loan home condition requirements are typically harder than those for loans backed by the government. Specific requirements consist of:

  • Credit Score

To be eligible for a conventional loan, mortgage lenders require a minimum score of 620. You’re more likely to receive better terms and an interest rate if your score is higher.

  • The Ratio of Debt To Income (DTI)

Your debt-to-income ratio (DTI) takes into account all of your monthly obligations, including credit card debt, student loans, and auto loans. The majority of lenders prefer that this ratio stay between 43% and 45%.

  • Down Payment

A down payment of 3 or 5% is permissible for many fixed-rate conventional loans for primary residences, although a down payment of 20% is the standard.

  • Private Mortgage Insurance (PMI)

If your down payment is less than 20%, you have to pay private mortgage insurance (PMI), which is an extra charge added to your monthly payments.  

  • Loan Size:

The majority of conventional loans are also conforming loans, meaning they follow the maximum loan amounts set by the Federal Housing Finance Agency (FHFA). The location of the property affects these limitations. In most of the United States, $766,550 is the limit for 2024. $1,149,825 is the conventional loan limit for some states and more expensive regions.

Conventional Loan Requirements

Programs for first-time homebuyers can lower your PMI premiums and enable you to purchase a property with a smaller down payment. You may be better off with a conventional mortgage, depending on your needs and financial status. Additionally, you may be eligible for a USDA, VA, or FHA loan.

Benefits Of Conventional Loans

Cancellable Mortgage Insurance

You won’t have to deal with PMI for the duration of the mortgage term if you have cancellable mortgage insurance, even with a modest down payment. It is possible to request to have PMI canceled once you own 20% of the house.

Adjustable Payback Schedules

The most common loan terms when considering conventional loans are 15-year and 30-year payback periods. On the other hand, a greater variety of terms—typically 8 to 29 years—are available for conventional loans from certain lenders through their flexible-term or flex-term loan programs.

More Financing Options And Types of Properties

Conventional loans are available for second homes and investment properties, but government-backed mortgage programs typically require you to live in the property. Furthermore, because jumbo loans are classified as conventional loans, highly qualified borrowers can get large loan amounts. 

Want to have an Experienced Loan Officer

Visit Our Mortgage Knowledge Centre