Any home loan not backed by a government agency is considered a conventional loan. Government-backed loans such as FHA loans, VA loans, and USDA loans are often tailored to borrowers with less-than-ideal credit or limited down payment availability. Conventional loans are often a great option for those with stronger credit and income or for buyers interested in a home loan that exceeds the limits placed on government-backed options. Andrew O’Fee – The Yankee Closer offers great rates and terms on conventional loans to homebuyers throughout Memphis.
Conventional mortgages can be either conforming or non-conforming loans. Fannie Mae and Freddie Mac establish criteria that loans must meet to be eligible for purchase by the two entities. Conforming loans meet the requirements and are eligible for purchase while non-conforming loans do not. The first think looked at is generally the loan amount. Loans greater than $453,100 are not eligible for purchase and are therefore considered non-conforming loans.
Historically, conventional loans in Tennessee have required a down payment of at least 20% of the purchase price. If credit and income support it, buyers can find conventional loans today with down payment options as low as 3%. It is important to note that a 20% down payment allows buyers to forgo private mortgage insurance (PMI). If a lower down payment is preferred, PMI may still be required. Once 20% equity is reached, you are able to cancel your mortgage insurance on a conventional loan. Mortgage insurance often cannot be cancelled on government-backed loans such as FHA loans.
Credit score, income, and debt-to-income (DTI) ratio requirements are not set in stone when it comes to conventional loans. Every lender will have their own unique requirements although many follow similar guidelines. Buyers interested in low down payment options will most likely need a credit score in the 700 range. Those who can make a larger down payment may be approved with a significantly lower score. The exact requirements will depend on each buyer’s unique financial situation.
Fixed-rate, adjustable-rate, and hybrid rate options are available with conventional home loans. Many homeowners prefer fixed-rate mortgages because they offer long-term stability and peace of mind. With an adjustable-rate mortgage (ARM), the interest rate on your mortgage will vary from time to time based on the market. One trade-off is ARMs typically start out with lower rates than fixed-rate mortgages. Buyers with plans to relocate or refinance in the near future may find that an ARM is their best option as they may be able to save money in the short term.
Andrew O’Fee – The Yankee Closer offers great rates and flexible terms on conventional loans throughout Memphis. Whether you are purchasing your very first Tennessee home, or refinancing your existing mortgage, we have a conventional loan option that will meet your exact needs. For more information on our conventional loan products, contact us today.