At First Community Mortgage we offer all types of home loans. FHA, VA, USDA Rural Development and Conventional home loans. There are many factors that come into play when helping a buyer choose the right mortgage. Some of the decision are with down payment, what is the buyers credit score, how much is the buyer trying to borrow, etc. At the Scott Miller team, we listen to the buyers monthly budget requirements and we understand the amount of money they want to spend to purchase their new home. We listen to their needs and explain and illustrate each loan program available so the buyer can make an informed decision. To help you decide which loan is the best for you call us at 763-567-7218
What is a Conventional Home Loan?
The loan types are FHA, VA, USDA and Conventional. A conventional home loan is a loan that is based on rules set by Fannie Mae and Freddie Mac. There are very few differences between Fannie Mae and Freddie Mac and the buyer may not even be aware of which program the lender is using. Conventional financing is sometimes used if the property has a few small imperfections on it. (For example, there may be some peeling paint, missing hand rails or have a cracked window.) Typically the appraiser is not as concerned about these smaller issues so the seller is likely to accept conventional financing over other types of loans. Who is eligible for a conventional home loan. To find out if you are qualified for a conventional home loan call us at 763-567-7218
Conventional Mortgage Benefits
There are many benefits for financing with conventional financing. The mortgage insurance (needed if you put less than 20% down) will go away after 9 years. Unlike FHA financing where the mortgage insurance will last the life of the loan. Typically the mortgage insurance is less than FHA with conventional financing. Conventional financing will allow higher loan amounts than FHA so this would be a great reason to use conventional financing for a home purchase. Also, the effective interest rate, (combining the actual interest rate and the interest rate with the mortgage insurance) is less than FHA. To see if this is the right loan for you call us at 763-567-7218
Conventional Mortgage Down Payment
This is a great question as most people think the down payment has to be higher. The minimum down payment for a conventional home loan is 5%. With certain bond programs it would be as little as $1000. Conventional home loans are also used to purchase a second home or rental property. The down payment requirement will change on this type of purchase but it is still a relatively smaller down payment than most people believe. to determine the amount of down payment required, call us at 763-567-7218
What is the Difference Between Conventional & FHA Financing?
Both FHA and Conventional home loans are good loans. They are done for a variety of reasons. Conventional loans are more sensitive to credit score and down payment. The higher the score, and the higher the down payment, the better the interest rate. Also the down payment and credit score will impact the cost of the mortgage insurance. FHA financing allows for lower credit scores and allows the buyer to have more consumer debt. However, the mortgage insurance for FHA loans lasts the life of the loan. I do not want this to be the determining factor for FHA versus Conventional home loans. FHA represents about 55% of all loans done in the country so they are an excellent way to finance a home. The differences between the two loans are subtle and will vary based on the financial requirements for the buyer. For help to determine the best loan program for you call us at 763-567-7218.
Conventional Loan Limits
Fannie Mae sets the loan limits for each State. In Minnesota, the maximum conforming loan size is $453,100. This will change in each state based on Fannie Mae’s calculation. The maximum loan is calculated by the purchase price less the down payment. So if the buyer is wanting to put minimum down (5%) that would be a purchase price of $476,947. If your loan size goes above $453,100 it is considered a non-conforming or Jumbo loan program and that will be discussed in another section on this site. There are ways to keep the conventional loan limit to $453,100 with a purchase price over $500,000 without increasing the out of pocket expense to the buyer. This will depend on the financial qualifications of the buyer, but there are ways to prevent a non-conforming loan amount and NOT increase the down payment. To see if this is the right option for you call us at 763-567-7218