Conventional or conforming loans refer to any mortgage that is not insured by the federal government. These types of mortgages follow the terms and conditions set by Fannie Mae and Freddie Mac. They are government sponsored institutions who are the largest purchasers of mortgages in the United States. These loans have stricter qualifying guidelines compared to government insured loans. High credit scores are recommended for this program since it will directly impact your monthly mortgage payment. Your debt to income ratio is also carefully reviewed and needs to be below 45%. A common misconception about conventional mortgages is that a 20% down payment is required in order to qualify. The reality is conventional financing allows for 3% down payment when used in combination with monthly mortgage insurance.

Why Are Conventional Loans So Great?

Conventional loans are one of the best options for prospective borrowers with a high credit scores. By having a higher credit score additional benefits become available like no mortgage insurance, lower down payments, and more competitive pricing. When considering a new home loan conventional financing should be at the top of the list if you have above average credit, a larger down payment, or would like to avoid the additional cost sometimes associated with government insured loans.

What Are the Advantages of Conventional Loans?

• Competitive pricing
• No prepayment penalty ever
• No mortgage insurance option
• Up to 45% debt to income ratio
• Allows for 3% seller paid closing costs

What Are the Waiting Periods After a Hardship?

• 4 Years from Foreclosure or Short Sale
• 4 Years from Discharge of Chapter 7 Bankruptcy
• 2 Years from Discharge of Chapter 13 Bankruptcy

What Are Some Popular Conventional Programs?

Conventional Purchase

• Loan amounts to $417K
• 3%, 5%, 10% or 20% down
• Don’t have to be 1st time buyer
• With or without mortgage insurance

Conventional Refinance

• Competitive interest rates
• Loan amounts up to $417K
• 30yr, 25yr, 20yr, 15yr, or 10yr
• Fixed or adjustable rates available

Conventional Cashout

• Up to 80% LTV
• Competitive interest rates
• Payoff a 2nd mortgage or HELOC
• Cashout to payoff high interest debt

Be sure to take a close look at all of the Conventional Programs to find out which one is right for you.