Buying A Home With A Conventional Loan

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Buying A Home With A Conventional Loan

Buying A Home With A Conventional Loan: The Basics

When you are interested in Buying A Home With A Conventional Loan it is a smart move to learn all you can about conventional loans as well as the other primary mortgage program, FHA Loans.  The two most popular loan programs in the United States are Conventional Loans and FHA Loans.  Conventional Loans also known as Conforming Loans have their guidelines created by and overseen by Fannie Mae and Freddie Mac who are government sponsored enterprises whose job is to make the standards for credit to be given to prospective borrowers and limit the risk associated with lenders who extend the credit.  Conventional Loans are also called Conforming Loans because they must conform with the guidelines of Fannie Mae and Freddie Mac.  On the other hand you have FHA Loans who have their guidelines created for and overseen by the US Department of Housing and Urban Development or HUD for short.  FHA Loans are government insured meaning that any lender who issues FHA Loans will be made whole should a borrower go through foreclosure and the lender won’t get as much for the home as what is owed on it.  FHA Loans also have a completely different set of guidelines and you can find them in the HUD 4000.1 FHA Handbook which outlines hundreds of pages of guidelines.  Finally, FHA Lenders need to be approved by HUD in order to fund FHA Loans.  As you can see, there are options for you Buying A Home With A Conventional Loan.

Buying A Home With A Conventional Loan: FHA vs. Conventional

When Buying A Home With A Conventional Loan it is really nice if you can lay out the comparisons between the FHA Loan program and the Conventional Loan program.  First of all FHA Loans are only available for owner-occupied primary residences.  FHA Loans are not available for second homes or investment properties.  Conventional Loans on the other hand can be used for second home and investment property financing.  Speaking from a general sense, FHA Loans are more lenient with their guidelines than Conventional Loans which is why they are so popular.  FHA Loans require a minimum FICO credit score of 580 while Conventional Loans can only be had with a 620 FICO credit score or greater.  The maximum debt to income ratio for FHA Loans is 56.9% while it is 45% for Conventional Loans.  However, if your FICO score is under 620 for an FHA Loan, your debt to income ratio will be 43%.  If you have gone through a Chapter 7 Bankruptcy Buying A Home With A Conventional Loan you will need to wait 4 years from the discharge date of the bankruptcy while the waiting period is only 2 years for FHA Loans.  If you have a deed in lieu of foreclosure or short sale you will need to wait 3 years for an FHA Loan while it is 4 years for a Conventional Loan.  Finally, if you went through a foreclosure, the waiting period for an FHA Loan is 4 years while Conventional Loans make you wait a full 7 years before you can get a loan again.

Buying A Home With A Conventional Loan: Rates and PMI

Buying A Home With A Conventional Loan it is smart to know what to expect in terms of interest rates and any other factors that may affect it.  Conventional Loans typically have higher interest rates than their government sponsored counterparts.  Mortgage Rates for Conventional Loans depend on the borrowers FICO credit score and the amount of the down payment on the home.  To get the best Conventional Loan rates, a FICO score of 740 or greater is preferred, but for every 20 points under 740 your credit score is, you will see an increased interest rate.  If you are not putting at least 20% down with a Conventional Loan you will be forced to pay private mortgage insurance or PMI which protects the lender should you have to foreclose on the home.  However, after you have 80% or less of your loan do, or your house has appreciated enough, the PMI can be removed.

If you are looking for an expert dealing with Conventional Loans as well as FHA Loans, then you need to get in touch with me ASAP by calling at 888-900-1020, email at contact@loanconsultants.org, or inquire through my website www.loanconsultants.org.

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