Using a Conventional Loan to Buy a Home

If you have decided that you are ready to become a homeowner, and are trying to determine the best type of mortgage for your situation, you may want to consider a conventional loan. Conventional loans are an excellent financing option that offer excellent terms and rates and are insured by private lenders. If you are located in Conyers, Georgia, and are trying to determine the most suitable type of home financing, Preferred Capital Funding is here to help. Read on to learn more about using a conventional loan to purchase a home.

How Do Conventional Loans Work?

Loans can be categorized into two types: non-conventional and conventional loans. Non-conventional loans, like FHA and VA loans, are insured by the government. On the other hand, conventional loans are not backed by the government and require private mortgage insurance, (PMI), since the lender is not guaranteed to be paid back if the borrower defaults on the loan. Because of this, conventional loans are also considered riskier than non-conventional loans and typically require a higher down payment amount. Conventional loans fall into two types: conforming and non-conforming. Conforming loans can be for the amount of up to $647,200 in most locations. If you need a loan amount that is higher than that, you will need to apply for a non-conforming loan, (also known as a jumbo loan). Jumbo loans are worth a substantially high amount of money, and are considered a high risk to lenders.

What Are The Advantages of a Conventional Loan?

There are several benefits to financing a home with a conventional loan, including:

• They have lower interest rates and offer both adjustable and fixed rate options.
• Conventional loans offer a wide variety of terms that range from ten to thirty years.
• Loan processing can be quicker with a conventional loan.
• You can avoid paying private mortgage insurance costs if you are able to make a 20% down payment.
• There are many down payment options available, some even as low as 3.5%

What Are the Requirements For a Conventional Loan?

In order to qualify for a conventional loan, a borrower needs to meet certain qualifications, including:

• A borrower must have a debt-to-income ratio, (DTI), of 36% to 43%.
• A credit score of 620 – 640 or higher is desired.
• A borrower must make a minimum down payment of 3%, and if you have a lower credit score, you will be required to make a higher down payment.
• A borrower will need to provide income verification and tax documentation from the past two years.

Becoming a Homeowner Using a Conventional Loan

Conventional loans can be a great way to make your dream of becoming a homeowner a reality. If you are interested in learning more about your mortgage options in Conyers, Georgia, Preferred Capital Funding can help. Contact us today for a consultation.