Homebuyers

By Jessica Smith, Mortgage Loan Officer

When financing a home there are many loan programs to consider such as FHA, VA, USDA Rural Development and conventional mortgages. They all have different advantages and unique eligibilities to obtain a mortgage. Let’s dive into some of the specifics and benefits of qualifying for a conventional loan.

Definition

Conventional mortgage or loan means that it is not insured or guaranteed by the government like a VA and FHA loan are. It’s actually backed by private lenders which can also mean they are riskier. Qualifying can be tougher than it is for government loans.

Down Payment

Historically, lenders have required up to 20% down when purchasing a home. To compete with the FHA’s minimum 3.5% down, conventional loans can be as low as 3% down and meet the income requirements set by Fannie Mae and Freddie Mac. When putting down less than 20%, you’re required to pay Private Mortgage Insurance (PMI). The premium can be as low as 18%. Mortgage insurance will automatically end once equity of the home has reached 20%.

In comparison to an FHA loan, you pay a one-time funding fee, ranging from 1%-3% of the loan amount, and monthly mortgage insurance premium that remains on the life of the loan.

FICO Score

Although FICO score requirements can vary, a score of 620 is typically the minimum credit score needed to obtain the loan. However, your interest rate will depend on your credit score and credit history. Therefore, the greater your score is, the less you’ll pay in interest for the duration of the loan.

Fixed mortgage terms can range from 30, 20, 15 and 10 years.

Conforming

Loans comply with the guidelines of Freddie Mac and Fannie Mae which also includes a maximum loan amount. As of 2020, the standard limit for conforming loans is $510,400 for one-unit properties. Jumbo loans are any amount higher than the standard conforming amount, and portfolio loans are conventional loans a lender chooses to keep in its own portfolio instead of selling it on the secondary market which give lenders more flexibility with underwriting, such as assisting with those who have low credit scores or higher debt-to-income ratios.

We hope you’ve gained some insight on conventional loans and continue to research the many different mortgage options available to you. Making an informed decision about a mortgage is wise and important to make the loan choice that makes sense for you financially.

Questions? Contact our team!

Conventional Loans Explained
By Jessica Smith, Mortgage Loan Officer When financing a home there are many loan programs to consider such as FHA, VA, USDA Rural Development and conventional mortgages. They all have different advantages and unique eligibilities to obtain a mortgage. Let’s dive into some of the specifics and benefits of qualifying for a conventional loan. Definition Conventional mortgage or loan means that it is not insured or guaranteed by the government like a VA and FHA loan are. It’s actually backed by private lenders which can also mean they are riskier. Qualifying can be tougher than it is for government loans. Down Payment Historically, lenders have ...
What Home Insurance Actually Covers
By Bonnie Pappas, Mortgage Loan Officer A standard homeowner’s insurance policy is made up of coverages that may help pay to repair or replace your home's structure and belongings if they are damaged by certain acts, such as fire or theft. It may help cover costs if you accidentally damage another person’s property or if a visitor is injured at your home. It can also include damage caused by household pets. Insurance for condominiums generally covers your belongings, liability, and certain parts of the interior structure as defined by the condominiums by-laws or lease. What Does Homeowners Insurance Cover? Your place of ...
Down Payment Assistance Programs
By Andrew Mroki, Mortgage Loan Officer Tired of renting? Don’t have a lot of money to put down on a home? We have solutions. One of the down payment assistance programs that we offer at Michigan First Mortgage is the MSHDA program. You can also get an FHA, conventional, VA, and rural development loan. You can qualify to get up to $7,500 in down payment assistance towards your required down payment and also cover closing costs. The member is required to use 1% of their own funds towards the transaction. MSHDA comes with a standard set rate which is controlled by MSHDA ...
Buying a Home as a College Student
By Annemarie Rogers, Mortgage Loan Officer For most Americans, buying a home is the most expensive purchase they will make in their lifetime. It requires a steady income, responsibility, and discipline. But buying a home isn’t just about income. You will also need established credit and discretionary funds for the purchase. If you're wondering how to manage your finances, education and homeownership goals while going to college, read on. For traditional college students, pursuing higher education is often the first step to leaving their parents’ home. After living in a dormitory, many students will seek on-campus apartment and condo rentals. Campus housing ...
FHA vs. VA Loans
By Julie Jardine-Potratz, Mortgage Loan Officer An FHA loan is a good product for people who do not qualify for a conventional mortgage. If you are currently serving in the Armed Forces or are a veteran, you are fortunate to have another avenue in which to purchase or refinance a home. As a service member, you have the option of obtaining a VA loan, but is this your best option? That depends on your specific situation. Positive changes were recently made to the VA home loan program. in January 2020, the elimination of VA loan limits and structural changes were made to ...
More Articles
Newer Posts | Older Posts