The Conventional Purchase program is a great option when you are looking to purchase a new home as a primary residence, second home or investment property. These types of loans are generally $417,000 or less for a single family residence and make up the majority of home loans sold in America today. There are also established guidelines required for credit scores, income, work history, and minimum down payments. Below are just a few of the items a lender will look at when considering financing.
- Your total monthly expenses
- Your total gross income per month
- Your employment history
- Your credit score and payment history
- Your assets (checking, savings, and retirement accounts)
A common misconception about conventional refinances is that you need 20% equity in order to qualify. The reality is conventional financing allows you to refinance with as little as 5% equity in combination with financed, monthly, or lender paid mortgage insurance.
Why Are Conventional Loans So Great?
The Conventional Purchase program has very competitive pricing compared to some other programs available. This can make a big difference in your monthly mortgage payment and even the interest you will pay over the life of the loan. Even though this program is more difficult to qualify for you need to consider it, especially if you have equity in your home, above average credit, or would like to avoid mortgage insurance.
What Are the Advantages of Conventional Loans?
- Gift funds OK
- Competitive pricing
- No prepayment penalty ever
- 30yr, 25yr, 20yr, 15yr, or 10yr
- Up to 45% debt to income ratio
- With or without mortgage insurance
What Are the Requirements?
- Minimum credit score 640
- Debt to income ratio under 45%
- Need to verify your down payment
Frequently Asked Conventional Questions:
What are the documents I will need?
- Copy of driver’s license
- Two W2’s or Tax returns
- Two most recent paystubs
- Two most recent asset statements
- Copy of your mortgage statement
- Contact information for insurance agent
How much can the seller pay towards my closing costs?
Typically the seller can pay 3% of the sales price towards closing. If you put a down payment over 10% they can pay up to 6% towards your closing.
What types of homes can I purchase?
Conventional loans allow you to purchase single family homes, condos, investment properties, and 2nd vacation homes.
Will I have mortgage insurance?
The short answer is it depends. There are conventional purchase programs with or without mortgage insurance. This includes monthly mortgage insurance, financed mortgage insurance or lender paid mortgage insurance.
Should I get a home inspection?
Yes, it’s always a good idea to get a home inspection before you purchase a home. That way you know right away if there are any issues with the property you are considering purchasing.
How long does it take to purchase a home?
The normal turn time for a purchase is about 30 days. This assumes you have all your documentation available and we schedule your appraisal upfront.
How is my interest rate determined?
The interest rate you qualify for depends on the following factors: credit scores, down payment, type of loan, mortgage insurance or no mortgage insurance and the current bond market. All these factors combined play a role in the interest rate you qualify for.