Conventional Loans

Conventional loans are made at the risk of the lender without benefit of any government guarantee or government insurance. A conventional loan with an LTV (loan to value ratio) of greater than 80% requires primary mortgage insurance, which can be paid monthly. The borrower must have 5% of his/her own funds for the down payment and 2 months reserves on deposit. Closing costs must be paid by the borrower.

Conventional Loan Requirements

Requirements of a conventional loan applicant include excellent credit, job stability with sufficient income, a sizable down payment, and low debt to income ratios. Borrowers who meet Fannie Mae guidelines are rewarded with an interest rate only slightly lower than an FHA interest rate. This traditional, “tried and true” mortgage option is a loan with a constant interest rate and level, equal payments during a set period of time — most commonly, 30 years.

Benefits of Conventional Loans

The biggest selling point of fixed-rate loans is predictability, and they are particularly suited to people with steady incomes. If lower rates dictate the time is right to refinance, it’s a good idea to compare the costs of incurring a new mortgage — such as prepayment penalties and loan origination costs. You may want to refinance your loan or pay it off early to eliminate thousands of dollars in interest.

Loan Pre-Qualification

Looking to get pre-approved for a loan to buy your home? It couldn’t be easier. Apply now at Home Services Lending.

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