What is a conventional mortgage?
Conventional Loans or 30 years fixed mortgages are common in today’s housing markets. These loans have fixed rates and terms and are not backed by the Federal Housing Administration or the Department of Veterans Affairs.
Majority of conventional mortgages are called conforming mortgages. Conforming mortgages are home loans that follow a set of guidelines established by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac buy mortgages from lenders such as United Wholesale Mortgages and Quicken Loans and sell them to investors.
Conventional mortgages are used to buy primary residences, second homes, and investment properties. The terms of conventional mortgages have two types of interest rates: fixed and adjustable rates (ARMS). Conventional home loans also have many loan terms that can vary between 10 to 30 years.
Do I need mortgage insurance for a conventional mortgage?
Different lenders can offer different down payment options. Some lenders offer as low as 1%, therefore, finding what a homeowner can afford is very important before searching for a home. Down payments with at least 20% down qualifies for no mortgage insurance or PMI. However, if a homeowner decided to down less than 20% they can purchase mortgage insurance through their lender that costs much less than the Federal Housing Adminstration (FHA) and home owners can cancel their mortgage insurance once they each 20% equity.
How do I qualify for a conventional home loan?
Homeowners can qualify for a conventional mortgage if they are borrowing less than $636,150 for a single-family home. A good credit score of 700+ will benefit the homeowner in qualifying for the best interest rate possible. Borrowers can have up to 80% to 97% Loan to Value (LTV), meaning the borrower will borrow 80% to 97% of the home value. Borrowers need to have a low debt to income ratio (DTI) meaning that the calculated debt to income is generally equal or less than 43%.
What documents do I need to prove my income?