Are you interested in becoming a homeowner, and trying to decide what the best type of financing option will best suit your financial situation? Conventional loans are insured through private lenders and can be one great way to help you buy a home and they offer flexible terms with competitive interest rates. Lucey Mortgage Corporation can help you understand the various types of conventional loans that may be available to you in Mount Pleasant, South Carolina. Read on to learn about purchasing your dream home using a conventional loan.
How Does a Conventional Loan Work?
A conventional loan is not regulated by a government agency like an FHA or VA loan, (which are considered “non-conventional” loans), and is instead backed by private lenders. Since they are not insured by the government if a borrower defaults, conventional loans do pose a higher risk to lenders, which can cause application requirements to be more selective. Conventional loans fall into two categories: conforming and non-conforming loans. The government-sponsored entities known as Fannie Mae and Freddie Mac buy conventional loans and set a maximum loan limit amount, so if a loan falls below the current loan limit of $647,200, (or $970,800 in higher priced areas), it is considered a conforming loan, and if it exceeds that limit amount, it is classified as a non-conforming, or “jumbo” loan. Since non-conforming are typically or a very high loan amount, they have very strict eligibility requirements and require a down payment of at least 20%.
Conventional Loan Benefits
Conventional loans can offer many great benefits for a homebuyer, even though their eligibility requirements are stricter than non-conventional loans. Some advantages to conventional loans include:
- Faster loan processing times
- Lenders can offer a wide variety of terms, between 10 to 30 years
- Both adjustable rate or fixed rate options are available
- Conventional loans offer competitive interest rates
- They offer the opportunity to obtain funding for more expensive homes
- There are numerous down payment options available, with some as low as 3% down
General Eligibility Requirements For a Conventional Loan
The typical qualification requirements for a conventional loan include:
- A minimum down payment of 3%
- A minimum credit score of 620 – 640 or higher
- If you have a lower credit score, you will be required to make a higher down payment
- A debt-to-income (DTI) ratio of 36% or lower
- You will be required to provide income and tax documentation from the past 2 years
Buying Your Dream Home With a Conventional Loan
If you have made the decision to become a homeowner and want to learn more about your conventional loan options in Mount Pleasant, South Carolina, contact Lucey Mortgage Corporation today to get started. We can work closely with you to determine the best financing options for your situation.