What You Don’t Know About Conventional Loans
January 23rd, 2020
January 23rd, 2020
If there is one type of mortgage with which first time homebuyers are familiar, it is probably conventional loans. Conventional mortgages have been around for a long time and might be regarded as the most “basic” type of home loan.
There are no special requirements for conventional mortgages like being a veteran (which you need to receive a VA loan) or purchasing a home in a rural area (which you need to qualify for a USDA mortgage).
While you may already know quite a bit about conventional mortgages, there are some common misconceptions. Following are a few facts about conventional loans with which you may not be familiar.
1. Requirements for conventional financing are not that restrictive.
There is often an assumption that qualifying for a conventional mortgage in Indiana is difficult. But conventional mortgage requirements are not as restrictive as you might think. While you do need a healthy credit score and DTI ratio, lenders consider other aspects of your finances too.
2. It is often fast and easy to apply for a conventional mortgage.
For a lot of mortgage companies, conventional mortgages are their bread and butter. They have extensive experience with them. So, if you want to complete the loan process rapidly, that is another often overlooked benefit of conventional financing.
3. The conventional loan limits change every year.
Did you know that there are new conventional mortgage limits every time the calendar year turns over? If you are shopping for a home around the end of the year and you think you might need to borrow outside the current limits, see if you can find out what the loan limits will be the next year. Higher limits were implemented already for 2020 which could mean that you will qualify to purchase a home with a conventional home loan that you were unable to just last month.
4. Your down payment could be as low as 1%.
A lot of homebuyers automatically picture a down payment as high as 20% when thinking about conventional mortgages. It is true that you might end up paying that high a down payment depending on your qualifications and needs. But that does not mean conventional mortgages always carry high down payment requirements.
In fact, conventional loans can have some of the lowest requirements around. There is a program where you can qualify for as little as 3% down which many homebuyers know nothing about. That is lower than a 3.5% down FHA loan!
We go the distance to make home purchase affordable no matter what your cash flow situation is like.
5. Conventional loans can spare you from a PMI requirement.
As a first-time homebuyer, you probably know a bit about FHA mortgages, and might be aware of their many benefits (including down payments as low as 3.5% and lower credit score requirements).
But FHA mortgages require private mortgage insurance (PMI) as an additional monthly cost.
With a conventional loan and a high enough down payment, you do not need PMI. And if you do require PMI because you choose a lower down payment when you buy a house, you can cancel it later as you build up equity in your home.
Or on a conventional loan, you can negotiate by having a seller concession in which the seller pays the PMI upfront at time of closing leaving you without any monthly PMI. Many sellers prefer this option in lieu of having to drop their price. It is a win –win for buyer and seller.
Whether you want to put a low-down payment on a home, or you want a higher down payment conventional loan without PMI, we can make it happen.
To schedule your conventional loan consultation today, please call us at (317) 255-0062. We look forward to discussing your needs and matching you with the most suitable conventional mortgage.
We provide our clients with exceptional service and integrity which has become our hallmark.