Conventional Loans

What are Conventional Loans?

Conventional Loans are the most common of all loans. These loans are typically sold to Fannie Mae or Freddie Mac. They do not come with a government guarantee and require a down payment. For down payments that are less than 20% of the purchase price, mortgage insurance is required. They can be used to purchase a primary residence, second home, or investment property.

Requirements

All Conventional Loan require a down payment. Almost all of them require a down payment of 5%. If the down payment is less than 20% then the borrower is required to pay mortgage insurance. The mortgage insurance is usually paid monthly and insures the lender is made whole in the event of a default by the borrower. Conventional loans require a minimum credit score of 620 with a 20% down payment or a credit score of 680 with less than 20% down.

Benefits

Conventional loans are a good fit for borrowers who are well quailed and have enough savings to put 20% down. They are the only loan type that allows borrowers to purchase a second home or investment property.

Cost

A Conventional loan has the same closing cost as any other loan. If a homebuyer does not have at least 20% to put down on the purchase, mortgage insurance will be required.

Jumbo VS Conventional

Your budget: Jumbo mortgages typically have higher interest rates than conventional mortgages, so you will need to make sure that you can afford the monthly payments.

Your credit score: Jumbo mortgage lenders typically have higher credit score requirements than conventional mortgage lenders.

Your down payment: Jumbo mortgages typically require a larger down payment than conventional mortgages.

Your debt-to-income ratio: Jumbo mortgage lenders will consider your debt-to-income ratio when making a lending decision.

Your desired loan term: Jumbo mortgages are available with a variety of loan terms, so you can choose the one that best meets your needs.

How do VA loan rates and conventional loan rates compare?

If you compare conventional loans to va loans given the same credit score and loan amount the conventional rates are going to be way higher

A 740+ conventional borrower putting down 25% with might be person who may be able to get a rate comparable to a VA loan. The VA loan could have a 640 and get the same or better rate as a conventional borrower with 25% and a 740 score so VA is normally the way you want to go if you’re a Vet when it comes to purchasing. When it comes down to a construction loan one time close the rates and fees are now higher than on the conventional one time close. Also, there is only a jumbo conventional loan one time close construction loan available and no Jumbo VA construction option over $650K. A Veteran who owns their land might have equity to qualify for a conventional one time close if it’s the best option for them at that time. That’s why we are going to give you several options so that you can do what’s best for you and your family.

VA Construction Loan FAQ

Is there a rule or stipulation on the loan where we need to have the certificate of occupancy by a certain date or by so many months? – Yes, on VA Construction loans the builder has to commit to a build time, in order for you to occupy the home after the build a certificate of occupancy has to be issued by the local housing authority, in most counties.

Facts

Conventional loans are a good option for homebuyers with excellent credit, a small amount or no debt, and enough savings for a 20% down payment. Without a 20% down payment, private mortgage insurance is required for all conventional loans. A credit score of 620 is required with a 20% down payment. A credit score of 680 is required less than 20% down payment. Conventional loans can be used to purchase a second home or investment property.

Our goal at Security America Mortgage is to match the best product to the needs of our clients.

In addition to offering VA Home Loans, we offer Conventional, FHA, and USDA loans. Contact us today to discuss your loan options and determine which loan is best for you!

Also read the Benefits of Conventional Rehab Loan.

FAQ of Conventional Loans

Mortgage payment when no conventional loans taken?

The borrower is required to make a monthly payment if they escrowed for taxes and insurance. Please note, if the borrower is behind in their mortgage payments, a draw cannot be released until the loan is considered current.

Owner-builder projects on one time conventional loans?

All of the construction and renovation products require a true 3rd party builder contract. Both the project and the builder must meet Security America mortgage’s requirements.

Inspections for close conventional construction loans?

The drawinspections are paid in the Granite fees collected at closing. This is why it is imperative the number of draws are determined prior to closing. Additional draws will be charged a per draw fee based upon the fee schedule.

VA Loa or a conventional loan?

VA Loans have many benefits not offered by conventional loans, especially for first-time homebuyers with little or no money for a down payment. Unlike conventional loans, VA Home Loans do not have private mortgage insurance requirements. Additionally, VA Loans usually have lower rates than conventional loans and are not subject to the closing costs associated with conventional rehab loans. This is because there are certain fees that borrowers cannot be charged. VA Home Loans also gives you the ability to refinance to a lower rate without having to re-qualify for the loan, a process known as a VA Streamline Refinance, or IRRRL. Getting started on your VA Loan is easy; simply contact a VA Loan Specialist at 1-855-824-6727.