Mortgage Articles

Helpful Guide For Applying An FHA Loan In Texas Pt 2

All You Need To Know About A Texas FHA Loan

Part 2

FHA Loan Limits

Regardless of the FHA loan type you’re looking for; there will always be a limit on the mortgage. These limits are contingent on the county. FHA loan limits as of 2020 range between $331,760 to $765,600.

How To Qualify For FHA Loan

To be eligible for an FHA loan, you will have to satisfy certain requirements. It’s essential to not these are the minimum requirements for FHA, and lenders may opt to have more stipulations included. To ensure that you receive the best FHA loan terms and mortgage rate, look around for various FHA-approved lenders and compare their respective offers.

Credit Score

The minimum credit score you should have to receive an FHA loan is 500. You still qualify for an FHA loan if your credit score ranges between 500 and 579, but you’ll be required to make a significant down payment. Note that these are FHA rules – lenders can decide to go for a higher minimum credit score.

Down Payment Funds

If you have a credit score of over 580, your loan down payment can to as low as 3.5%. A credit score between 500 and 579 means 10% of the buying price will be dropped.

The upside is that the money doesn’t need to come from your personal savings. Gift money can be used to pay for your down payment so long as the donor writes a letter describing what sort of relationship they have with you, their contact information, gift amount, and a statement saying no repayment is needed.

Debt-To-Income Ratio (DTI)

The FHA needs a DTI that’s less than 50, which means that your monthly debt payments can’t exceed 50% of your gross income. This encapsulates debts you aren’t actively pursuing.

In the case of student loans that may be in deferment, your FHA loan will include 1% of the total loan as the monthly repayment amount. For any other loans you aren’t actively repaying, 5% of the total loan amount will compute your DTI.

Property Approval

The property you’re trying to purchase with an FHA loan, be it a condo, a house, a manufactured house, or a multifamily house, has to adhere to FHA minimum property requirements.

The FHA needs an appraisal that’s different from a house inspection. They want to be sure the house is a good investment – worth more than the initial amount you’re paying – and make sure that it has met livability standards and basic safety.

Mortgage Insurance

For every loan issued, FHA mortgage insurance is included. When you receive an FHA mortgage, you’ll be required to make an initial mortgage insurance payment (which can be included in the total loan amount), from where you’ll make monthly payments.

How To Apply For FHA Loan

Making an FHA loan application will need personal and financial documents that include:

  • A legal Social Security number.
  • Proof of citizenship, eligibility to work in America, or legal permanent residency
  • Bank statements for the last 30 days. You’ll also be required to offer documentation for any cash deposits done at that time (often pay stubs).

Advantages Of FHA Loans

  • Down payments for as low as 3.5%.
  • Debt-to income ratios that go as high as 50 are permitted
  • Lower minimum credit scores compared to conventional loans.

You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the first article in this series.

Helpful Guide For Applying An FHA Loan In Texas Pt 1

All You Need To Know About A Texas FHA Loan

Part 1

An FHA loan is basically a mortgage that’s been insured by the Federal Housing Administration. It allows down payments for as low as 3.5% with a 580 FICO. If you are a buyer with lower credit scores or limited savings, you should consider applying for FHA loans.

Regardless if you’re sure that an FHA loan is perfectly suited for you or you want to know what the FHA is, here’s a breakdown of all you need to know. You don’t need to delve into the FHA handbook for answers; find all the answers to FHA FAQs right here.

What Is An FHA Loan?

This is a mortgage that has been insured by the Federal Housing Administration. Borrowers with a credit score of 580 or more are eligible to get a minimum of 3.5% down payment. FHA loans are sought-after by first-time buyers with credit issues or little savings.

The FHA insures mortgages given by lenders such as credit unions, banks, and nonbanks. Upon default of the said loan, that insurance is in place to protect lenders. This is why FHA lenders are more than eager to provide favorable terms to borrowers who may be eligible for a home loan.

What Is The FHA?

The FHA, or as popularly referred to, The Federal Housing Administration, has been part and parcel of the U.S. Department of Housing and Urban Development since 1965. However, the FHA was founded over 30 years before that, as part of the New Deal.

In addition to the Dust Bowl drought and stock market crash, the Great Depression was marked by the housing market collapse. By the start of 1933, an estimated half of U.S. homeowners had defaulted their mortgages.

The FHA was founded under the National Housing Act of 1934 to cut foreclosures and make homeownership affordable. It put in place the 20% down payment as a new practice, insuring mortgages for up to 80% of a house’s value – in the past, homeowners were limited to borrow up to 50-60%.

What Are The Differences Between A Conventional Loan & FHA Loan?

  • Compared to Conventional Loans, FHA loans permit lower credit scores and, in some circumstances, low monthly mortgage insurance payments.
  • FHA loans may have closing costs not required by conventional loans
  • FHA regulations are more open-minded when it comes to gifts of down payment cash from employers, family, or charitable organizations.

Various Types Of FHA Loans?

The FHA provides various loan options, from relatively standard purchase loans to products specially made to meet highly specific needs. Here’s a look at FHA loans used to purchase a house:

Common FHA Purchase Loans

Basic Home Mortgage Loan 203(b)

  • Fixed not adjustable rates.
  • Various types of houses are eligible.

203(k) Rehab Mortgage

  • Renovation and Finances purchase with a single loan.
  • Buy and refi choices are available.

Construction to Permanent (CP) Loan

  • Finances the construction of a house together with the land on which it will be built.

Title I Properly Improvement Loan

  • Used for repairing an existing house or buy a manufactured home.

Energy-Efficient Mortgage(EEM)

  • Funds energy-efficient upgrades during a refinance or home purchase.
  • Available for existing or new homes.

You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the second article in this series.

Important Things To Understand When Applying For A Texas Home Loan Pt 2

Top 6 Things To Know Before Taking A Home Loan In Texas

Part 2

3. The Small Details In The Loan Contract Matter

An agreement for a home loan is a legal contract like any other and the legal terminologies can easily cause perplexity to the borrower especially the small “hidden” details in the agreement.

For instance, one may think a loan “default” implies a situation when the borrower is incapable of servicing by payment of EMI. To some banks, the interpretation for default may mean when a borrower dies, goes through a divorce (and the spouse was a co-applicant in the home loan), or when the borrower is sued for a civil or criminal case may be tax fraud.

It is also common to find clauses requiring the borrower to attach extra property for loan security in the event the price of the original property falls. In this case, the bank may adjudge the act of omission to provide extra collateral as a default.

4. Negotiate For A Favorable Rate

You must try to negotiate for a more favorable interest rate on the loan regardless of the loan type you have applied for as the borrower. In most cases, the bank holds the upper hand in the negotiations but a borrower can always bargain for lower rates especially if they have a long-standing relationship with the lender or a strong credit rating.

It is key that you have a clean record of timely loan repayment to support your credit history and request for favorable loan rates. Most banks are appreciative of a strong credit rating/history because a strong credit rating supports their quest for a good lending business.

Additionally, it might prove helpful if you can try to secure the loan at the end of a month when banks are racing to hit monthly targets for growth and expansion of loan portfolios.

5. Long Loan Repayment Durations Mean Expensive Loans

The Reserve Bank of India has been aggressive in enforcing the monetary policy for a considerable time now. An increase in the base lending rate has pushed banks to increase the interest rates charged to their customers on home loans and which implies a higher EMI for the borrower.

Many borrowers are unable to meet the EMI and appeal to the lender for an extension on the loan repayment duration in an attempt to lower the EMI. This is a move that creates temporary relief for the borrower who is in the desperate situation. However, in the long run, the borrower ends up paying more money.

As an illustration, consider a situation where the borrower has taken a loan of Rs 30 lakh to be repaid after 20 years at a rate of 10.5% per annum. In this case, the EMI to be paid is calculated at Rs 29,951 while the total interest to be paid on the loan will end up at Rs 41,88,240.

For a home loan with a long repayment tenure, the borrower ends up paying an interest amount that is higher than the principal amount borrowed.

6. Explore Alternative Lenders

Just because you have secured a loan with a given lender does not mean you are stuck with the lender for the duration of the loan tenure.

If you can source a lender with better financing terms than the original lender, you can always change lenders through available refinancing methods. Currently, most banks have removed pre-payment penalties on floating rate loans and only seek a processing fee from the borrower to effect the change.

As a borrower, always try negotiating for lower rates by seeking a reduction or a full waiver based on a study of comparable home loan products in the market.

You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the first article in this series.

Important Things To Understand When Applying For A Texas Home Loan Pt 1

Top 6 Things To Know Before Taking A Home Loan In Texas

Part 1

The process of taking on a loan is a bit more complex than many people think. From advertisements, it seems like many banks are always ready to give out as many loans as possible which contradicts the dreary process one must go through to have a loan approved.

Loans, like other financial investments, require the holder to be well conversant with how a loan product works to avoid getting into financial ruins later.

The following are the important factors to be aware of before getting into a loan contract with your financial institution.

1. Determinants Of Loan Eligibility

One of the most informal ways of qualifying a borrower for a loan is to compute their Equated Monthly Installment (EMI). Often, banks will require you to part with 40 to 50% of your monthly salary which will be directed to pay the loan. Noteworthy, reimbursements and allowances are not considered part of your salary used to net the EMI.

Additionally, your EMI will be negatively affected if the loan holder is servicing another debt elsewhere using their salary stream. In other situations, banks are keen on the number of dependents under the borrower. If more money from the applicant’s salary must be diverted to other important needs, the implication is a lower loan repayment capability.

Aside from the level of income after expenses, the reliability of borrower’s income stream is also questioned. Those borrowers with a more stable income are likely to find the eligibility criteria easier compared to borrowers in self-employment with unsteady income flow.

How old are you will influence the duration of the loan repayment period. Under normal scenarios, loan repayment tenures will not exceed the retirement age unless the borrower has a younger loan co-applicant.

Also, the co-applicant cannot be minor and should have achieved a given number of years for the application process to be successful, – a law that was set up to minimize ownership disputes. A co-applicant can enable the one to get a higher loan amount if the income level of the co-applicant is considered in the eligibility test.

The value of the property also affects the success of a loan application process. Most banks will not lend more than 70-80% of the value of the property to the borrower.

2. The Type Of Loan The Borrower Seeks

The type of interest rating categorizes home loans between loans with a fixed interest rate throughout the loan repayment duration or loans with a floating interest rate that varies from time to time depending on the market conditions.

Just as the name may suggest, for a fixed interest rate loan the interest charged on the loan does not change with fluctuations in the money markets. However, the interest rate on this loan is usually 1-2.5% points above the contract interest rate on a floating interest rate loan.

The clause to add extra percentage points on interest rating for a fixed-rate loan will vary from bank to bank.
The important thing to remember is that the EMI will be affected by the amount of interest charged on the loan. A higher interest rate will increase the number of periodic loan instalments required to be paid to retire the loan.

At face value, fixed-rate interest rate loans may seem a more viable financing option until you speak to a loan expert. When interest rates in the money market fall, the borrower is stuck paying a loan above the interest rates; the borrower’s existing home loan proves quite expensive in the long run when interest rates fall.

In such a fixed-rate loan case where interest rates fall, a borrower is legally required to pay an equal amount of interest charges all the time regardless of the level at which the interest rates in the money markets are prevailing at.

Additionally, it is common for banks to insist on adding an interest rates review clause in the loan contract where the bank exploits avenues to raise the interest rate on the home loan after a fixed period or a drastic rise in interest rates.

On the other hand, floating rates are more preferred unless the borrower (with the help of a loan’s expert) can rationally foresee a big increase in interest rates in the market over the loan tenure.

You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the second article in this series.

The Most Important Benefits Of Taking A Texas Home Loan

Applying For Home Loan In Texas: Why It Is Good?

The decision to take a home loan can truly change your life, and not necessarily for the better. A home loan is a long-term commitment, so there’s no wonder many people prefer to stay away from it. Nevertheless, home loans also offer several benefits that are worth taking into account when you make your decision whether to become a homeowner or to keep renting.

As property prices are always on the rise, it is hard to overlook the fact that a home loan is a huge liability. Buying a home solely through savings is only a dream for many. Almost all of us need to take a home loan to make this happen. Here are some of the advantages of this type of loan.

Self-Confidence Boost

Buying a home is the biggest financial investment many people make throughout their entire life. This can provide them with a sense of accomplishment and with a significant self-confidence boost. You can feel better about yourself, regardless of the main purpose of your purchase. Even if you don’t buy it as an investment, a home is in itself a very important component of our investment portfolio.

Capital Appreciation

If you’ve followed the real estate market over the past five years, you’ve probably noticed that prices have increased quite a lot. This attractive capital appreciation should be a good enough reason to buy a home, even if you have to take a loan for that. Construction costs have risen at a rapid pace during the past decade. Also, rental rates keep pace with inflation, so you end up paying more from one year to the next. By investing in your own home, you won’t have to put up with the increasing cost of renting.

Low Interest Rates

A home loan can spread over a minimum 10-year period. It is therefore a long-term decision. During all this time you can experience a fluctuation of interest rates in up and down cycles. This means that there will be periods when you’ll take advantage of the lower interest rates, at least for a while.

The best way to use this cyclical evolution to your advantage is to actively manage your home loan. This is relatively easy, once you understand how such things work. Banks and financial institutions are usually happy to offer you new loans to refinance your old ones. If you apply for a refinancing loan during one of the favorable moments of the interest rate cycle, you’ll manage to save quite a lot on your home purchase.

Tax Benefits: Interest Paid

According to the law, you can claim the total interest payable on the purchase or the construction of your home while calculating the house property income.

The interest payable for pre-purchasing or pre-building your home is deductible in five equal annual installments.

Tax Benefits: Principal Repayment

Also, the principal repayment up to a certain value on your home loan will be considered as a deduction from your gross total income.

Before making a decision, let one of the experts at Mortgage Lending Texas help you find out exactly what loan is best for you.  Feel free to contact us or call us today!

A Helpful Guide For A Texas FHA Loan Qualifications

8 Things You Need To Know To Qualify For A FHA Loan In Texas

Part 2

6. Choosing The Right Type Of FHA Loan

Different types of FHA loans are offered by lenders and the most common type remains 30 years fixed interest loan. There is also the option of an FHA loan with a fixed interest rate for a period of 10 to 25 years and you also have the option of an adjustable-rate FHA loan. With an adjustable-rate FHA loan, you will benefit from fluctuating interest rates at particular time periods.

For instance, a 3/1 adjustable rate FHA loan allows a fixed interest rate for the first 3 years but the interest rate is reset every year after that. You can get an adjustable loan with different periods of a fixed-rate term such as 3/1, 5/1, 7/1, or 10/1 with the 30-year loan. However, the FHA loans with fixed interest rates are more popular as adjustable-rate loans are deemed riskier by buyers.

7. Understanding FHA Loan Costs

An FHA loan also comes with the mandatory cost of private mortgage insurance. It is the insurance that protects the lender in case the borrower defaults and as a borrower, you need to pay an upfront fee as well as a monthly fee. It is essential for everyone who opts for less than a 20% down payment.

8. Starting The Application Process

If you have checked everything and you think you will qualify for an FHA loan, and it is now time for you to apply, you should first try to get pre-approved with your chosen lender. It could be a credit union or local bank or an online mortgage lender or an independent mortgage broker.

Start the process with multiple lenders and ask for quotes for payments, fees as well as rates. Keep in mind that there is huge competition in the mortgage lending business even with an FHA loan, and even a slight difference in the closing costs or interest rates can help you save thousands of dollars.

Mortgage Lending Texas

Here at Mortgage Lending Texas, our team has mortgage professionals all over Texas. We are dedicated to helping our clients get the highest quality service for all their mortgage needs. We are committed to get our clients the lowest rates and to help them choose the best from multiple loan programs in The Woodlands, Tomball, San Antonio, Spring, Houston, Austin, and Dallas, Texas.

Our team of mortgage professionals has multiple years of experience and we will work with you to make sure that you get a customized home loan that is exactly right for your situation and meets your expectations. Whether you are buying your first home or buying your dream home or refinancing a loan or consolidating debt, our team of highly experienced loan officers will make sure you are able to find the right loan at the lowest possible rate.

We strive to create a lasting relationship with our clients to allow us to serve our clients for many years in the future. We are different from other mortgage companies that operate nationwide. We promise that all your information will always be safe and private. We have a well-earned reputation in the lending community for trustworthiness and reliability.

Contact our expert mortgage professionals, call us today, or use our interactive tools that are on offer on our site. We cant wait to meet you. Click here to go to the first article in this series.

A Helpful Guide For A Texas FHA Loan Qualifications

8 Things You Need To Know To Qualify For A FHA Loan In Texas

Part 1

With the help of FHA loans, you can now fulfill your dream of owning a house with a low payment or limited credit. Here is what you need to know about qualifying for an FHA loan and things you can expect.

The FHA loan program allows you to buy a home with just 3.5% of the property value as a down payment even when you have a credit score that is lower than as required by traditional mortgage providers.

It is also important to understand that the FHA loan program is not limited to low-income applicants or first-time homebuyers. Here is what you need to know about FHA loan qualifications.

1. Verifiable Income

One of the biggest factors that affect your qualification for an FHA loan is your ability to repay the loan. Here is a rough criterion you need to meet in terms of income:

The mortgage payment should be below 35% of your income before taxes and all your monthly debt payments including your mortgage, credit cards, car loan, or any other loan should be within 48% of your income.

If all these things sound confusing, feel free to use our home affordability calculator to figure out the maximum amount you can afford to spend on a home. If your dream property costs more than what you can afford now, you should try to pay off as much debt as possible before applying for an FHA loan.

2. Down Payment – 3.5%

The minimum down payment you need to make for an FHA loan stands at 3.5%. However, it is close to 6% of the purchase price of the home in reality as you also need to pay the closing costs. This closing cost also includes the upfront mortgage insurance premium which is equivalent to 1.75% of your home’s value. You can bring this insurance premium down to 1.25% when you undergo an FHA approved credit counseling program before you close the deal.

3. Credit History

Established credit history is a must and you need to have at least 2 lines of credit such as a credit card and a student loan in order to qualify for an FHA loan.

4. FICO Score Range 580 to 640

The minimum FICO score you need for qualifying for an FHA loan program is 580. However, you should know that FHA is not the lender but it acts as an insurer and the minimum credit score requirements are set by the lender. This minimum score is often around 640 when it comes to FHA loans. Keep in mind that conventional mortgages usually require a FICO score of around 700.

You can check your credit score for free if you don’t already know it. If your score is above 640, is completely safe to apply for an FHA loan. If your credit score is below this limit, get in touch with the chosen mortgage lender and inquire about their minimum scores to process FHA loan applications. Keep in mind that you should do all this before making an official application.

5. Remain Within FHA Loan Limits

You cannot borrow as much as you want with an FHA loan as there are federally set limits that depend on your state and county. However, in most cases, the limits aren’t low enough to prevent you from buying a home that is expensive.

Contact our expert mortgage professionals, call us today, or use our interactive tools that are on offer on our site. We cant wait to meet you. Click here to go to the next article in this series.

Applying For Mortgage In Texas? Here Are The Pre-approval Requirements

5 Necessities For Texas Mortgage Pre-Approval

Part 2

3. Good Credit

For Conventional Loans and some Federal Housing Administration loans, a 620 or more FICO score is needed by most lenders before approval can begin. 760 or higher credit scores will usually result in customers getting lower interest rates from lenders. According to FHA guidelines, a borrower can pay as low as 3.5% down if their score is 580 or more.

new San Antonio home bought with an FHA mortgage loan moderate incomeA larger down payment is required of borrowers with lower scores. Borrowers with low scores can often get assistance from lenders and can get score improvement suggestions.

A payment of $1,288 each month would be required for a $250,000 loan and a FICO score in the range of 620-639. $1,062 would be paid by a homeowner who has a score in the range of 760–850. The difference between these two each year is $2,712. The rates that are offered today would give a buyer a score in the range of 620-639 an interest payment of $213,857 and $132,216 for the 760-860 range buyer. This presents an $81,000 difference.

4. Verification of Employment

Borrowers will need to be able to show lenders that they have a stable job before they can be approved. The buyer’s employer will likely be called to verify that they actually work for them and provide them with a salary. Previous employers may be contacted if any job changes were done recently.

When a buyer is self-employed, there is a lot more paperwork needed to verify the income and business of the buyer. Stability of the income of the borrower, the nature and location of the business the borrower has, any demand for the business’ services or products, the business’ financial strength, and the business’ ability to generate income are all factors that will be considered when self-employed borrowers try to get approval for a loan.

Recent tax returns from the past two years and the right schedules will need to be provided by self-employed borrowers.

5. Other Documentation

A credit report must be allowed by the lender for mortgages, along with the signature and Social Security number of the borrower and a copy of the driver’s license of the borrower. Additional paperwork may be needed by the lender, and you will need to have these documents ready to provide them to the lender.

The mortgage process will be easier if you can cooperate.

You will have an easier time buying a home if you talk to a lender before making any decisions. Before you head for a pre-approval appointment, get your paperwork ready and don’t hunt for houses until you get pre-approved.

You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the first article in this series.

Applying For Mortgage In Texas? Here Are The Pre-approval Requirements

5 Necessities For Texas Mortgage Pre-Approval

Part 1

While there may be some excitement in looking for a home to buy, anyone who really wants to buy will delay the open house visit and start at the lender’s office. Pre-approval letters are expected by most sellers, and a buyer having one will show an ability to get financing, giving them a better chance of negotiation.

There are five things that buyers need – employment verification, good credit, proof of income and assets, and some important documents for a mortgage pre-approval.

Pre-approval vs. Pre-qualification

A pre-approval has more value than a mortgage pre-qualification, but pre-qualifications have their use in showing the amount a buyer can afford to spend. Under the pre-approval, both documentation has been verified and the buyer’s credit has been check by the lender. Positive checks will result in a loan amount being approved for 60 to 90 days.

Talking with a lender and getting a letter of pre-approval gives many benefits to potential buyers. Budgeting and loan options can be discussed with the lender after pre-approval. Any problems with the buyer’s credit will be found when the lender checks for them. The price range will also be set and the home buyer will figure out their maximum borrow amount.

After an appraisal is done for the buyer and the property has a load applied to it, the final loan approval will be done.

Pre-approval Requirements

Good credit, employment verification, proof of income and assets, and more documents are needed by a lender in order to get mortgage pre-approval. Here you’ll find more information about how to obtain the necessary things to be pre-approved for mortgages:

1. Proof of Income

Year to date income and recent pay stubs indicating income, W-2 wage statements given through the most recent two years, bonuses or alimony, and tax returns from the most recent two years are needed by buyers to prove their income.

2. Proof of Assets

In order to show that they have down payment money, cash reserves, and money for closing costs, the borrower will have to provide investment account statements and bank statements.

Depending on the loan, the down payment, which is a percentage determined by the selling price, can be different. Unless 20% of the home’s purchase price is being put down, the buyer will have to either pay a funding fee or mortgage insurance premium or pay for PMI or private mortgage insurance, as required by the loan. Depending on the loan that is being pursued, other factors, such as the FICO credit score of the buyer and DTI or debt-to-income ratio, will be needed along with the down payment for pre-approval.

Loans conform to enterprise guidelines that are government-sponsored, with one exception in the form of jumbo loans. First-time buyers and buyers with low or moderate-income are perfect for Home Possible and HomeReady loans, which are provided by Freddie Mac and Fannie Mae respectively.

U.S. veterans, spouses that aren’t remarried, and service members can get VA or Veterans Affairs loans. No money down is required with these loans. In order to prove that certain funds aren’t loans, a gift letter may be needed if a buyer obtains assistance money for the down payment from a relative or friend.

You can use any of the interactive features on our website or call us anytime to speak to a diligent mortgage professional directly. We hope to work with you soon! Click here to go to the second article in this series.

Knowing The Types Of Texas Conventional Loan

6 Conventional Loan Types That All Texas Home Buyers Need To Know

Conventional loans are a common mortgage option, that even works for first-time home buyers. Yet you may not know that there are different types of conventional loans.

Here is more information about the primary conventional mortgage product types, and how they differ and what they might mean to you.

1. Conforming Conventional Loans

If conventional loans are under the maximum loan amounts that the Federal Housing Finance Agency has set and it matches the other loan standards that the Fannie Mae or Freddie Mac have set, it is known as a “conforming loan”. Because Freddie and Fannie are both government-sponsored enterprises, these are also known as “GSE loans”.

2. Nonconforming Conventional Loans

When conventional loans exceed the FHFA loan limit or it has used underwriting standards which differ from the ones set by Freddie Mac and Fannie Mae, it is known as a “nonconforming conventional” loan. The Jumbo loan is one of the common non-conforming conventional loans. You might require a Jumbo loan if you need finance for something that exceeds $484,350, in most of the counties in the U.S.

3. Fixed-Rate Conventional Loans

Whether they are nonconforming or conforming, every mortgage comes with interest that you have to pay back. With fixed-rate conventional loans, your interest rate will remain the same for the duration of the mortgage. Most buyers prefer the 30-year fixed-rate conventional loan since it translates into affordable monthly payments. There are also shorter terms made available.

4. Adjustable-Rate Conventional Loans

This is an alternative to fixed-rate mortgage as these loans offer an ARM or adjustable-rate mortgage. The conventional loan linked with an adjustable-rate is also called hybrid ARM, which has a rate that might go down or up over time. ARM rates typically adjust annually, from the initial fixed-rate period which is usually 3, 5, 7, or 10 years.

5. Low-Down-Payment Conventional Loans

There was once a time where obtaining conventional loans would require a 20% down payment. Since borrowers that match these requirements only need 80% of the value of the home, this is also known as the “80/20 conventional loan”. However, the requirements for down payments have become a lot more flexible.

  • 3% Down Payment: Home Possible and HomeReady are two conventional-mortgage options that require low down-payments, sometimes as little as 3%. This is also known as a “3-down conventional loan”. Borrowers that qualify for the 3% down payment, have to obtain finance for the remaining 97%.
  • 5% Down Payment: The borrowers that have a low credit score may have to put down a 5% down-payment or more to obtain one of the conventional loans. This means that they would have to finance 95% of the value of the home.
  • Zero Down Payment: If you wanted to know if you can get 100% conventional-loan financing, the answer would be yes. However, these are not always easy to find. Certain lenders which are usually credit unions provide in-house, non-conforming conventional programs for mortgages that offer 100% financing, yet specific qualification requirements usually apply.

6. Conventional Renovation Loans

It can be difficult to find the ideal home within your budget. Investing in a fixer-upper is one of the ways to own a home when move-in ready inventories are low or the price of properties is too high.

You can use any of the interactive features on our website or call us anytime to speak to a seasoned mortgage expert directly. We hope to work with you soon!