Understanding Your Conventional Home Loan Options

Are you ready to become a homeowner and weighing your financing options to determine the mortgage that will be the best deal for your situation? Conventional loans are an excellent pathway to financing a property because they offer favorable rates and terms and are insured through private lenders. If you are interested in buying a home in West Palm Beach, St. Pierce, or Tampa Bay, Florida, CTC Mortgage is here to help with your home financing. Read on to learn more about better understanding your conventional home loan options.

How Do Conventional Loans Work?

The two primary types of loans in real estate are conventional and non-conventional. Conventional loans are insured through private lenders, which means that they are not insured if a borrower is unable to make loan payments. This creates more risk for a lender, causing a borrower to pay private mortgage insurance and pay a down payment amount. Conversely, non-conventional loans are backed by the federal government, ensuring that the lender will be repaid if a borrower defaults on their loan payment.

Conventional loans also fall into two different categories: conforming and non-conforming loans. A conforming loan can be used to borrow up to $766,550 in most locations. If a borrower is looking to buy something more expensive than that, however, they will need to apply for a non-conforming loan, also known as a jumbo loan. Since jumbo loan amounts are a significant cost, they pose a high risk for lenders, therefore they have strict eligibility requirements and require a higher down payment.

How To Qualify For A Conventional Loan

There are some general requirements when applying for a conventional loan. First of all, a minimum credit score of 620 to 640 will be required, and the higher your credit score, the better mortgage rates you will be able to secure. When applying for a loan, a borrower will need to provide tax information and income verification from the past two years and demonstrate a debt-to-income ratio between 36 to 43 percent. Additionally, you can secure a conventional loan for as low as three percent down, however, if you are able to make a twenty percent down payment, you can eliminate private mortgage insurance costs.

The Advantages Of A Conventional Loan

There are several advantages of obtaining a conventional loan when buying a home. This loan type offers a wide variety of terms that can range anywhere between ten to thirty years. There are also many down payment options available, with some as low as three percent, although it’s important to remember, the higher down payment you can make, the less you will have to pay for your monthly mortgage. Conventional loans offer both adjustable and fixed rate mortgages depending on your personal situation. If you are interested in buying a home in West Palm Beach, St. Pierce, or Tampa Bay, Florida, contact CTC Mortgage today for a consultation.

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