Purchasing A Property With A Conventional Loan

Are you ready to buy a property and become a homeowner, and evaluating the kind of mortgage that will work best for your financial situation? A conventional loan can be a great financing option because it offers great terms and rates and is backed by private lenders. If you are shopping for a home in the areas of Palm Beach, Tri-County, or Broward County, Florida, and weighing your home financing options, CTC Mortgage can help. Continue reading to learn more about purchasing a property with a conventional loan.

Conventional Loans: Essential Information

There are two main loan types in real estate; non-conventional and conventional loans. Non-conventional loans, (VA, FHA, and USDA mortgages), are insured by the federal government, meaning that a lender will be compensated if a borrower defaults on loan payments. Conventional loans, on the other hand, are backed by private lenders and are not insured if a borrower is unable to pay off the loan. Because conventional loans are a higher risk for lenders, borrowers  are required to pay private mortgage insurance and a higher down payment. There are also two categories of conventional loans; conforming and non-conforming. Conforming loans can be used to purchase a property costing up to $766,550 in most areas, however, if a borrower needs a loan that exceeds that amount, they will need to obtain a non-conforming loan, or “jumbo” loan. Non-conforming loan amounts are a substantial cost and pose a very high risk for lenders; therefore, they typically require a twenty percent down payment.

What Are The Benefits Of A Conventional Loan?

Conventional loans can be an excellent mortgage option for a homebuyer, and can offer several benefits. First of all, there are numerous loan term options that can range anywhere between ten and thirty years. This loan type tends to have lower interest rates and offers borrowers both adjustable or fixed rate options. There are also many down payment options available, with some even low as 3.5%, and, if a borrower is able to make a twenty percent down payment, they will not be required to pay for private mortgage insurance. Finally, loan processing for a conventional loan tends to be faster than with other loan types.

How Do I Qualify For A Conventional Loan?

In order to apply for a conventional loan, there are certain requirements that must be met, including:

• The ability to provide verification of income and tax documentation from the previous two years.
• A credit score of at least 620 – 640.
• A minimum down payment of three percent is required, and the lower your credit score, the higher down payment you will be required to make.
• A debt-to-income ratio (DTI) of thirty-six to forty-three percent.

If you plan on buying a home in Palm Beach, Tri-County, or Broward County, Florida, contact CTC Mortgage today for a consultation.

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