Conventional Mortgage Loans

Conventional loans are backed by either Fannie Mae or Freddie Mac, and can be a great choice for your mortgage needs.  Many home buyers mistakenly think that these types of mortgage loans are limited to people with 20% or more down, but nothing could be further from the truth.

The down payment requirement is as little as 3%, but with less than 20% down, you will have mortgage insurance. However, the PMI can be cancelled after just 2 years if you have 20% or more equity in your home, so in many cases is only a short term cost.

PMI can also be financed into the loan in the form of "lender paid" mortgage insurance.  Essentially, with this type of loan structure, the mortgage insurance is built into the interest rate.  It is important to carefully consider your short and long term plans when choosing a lender-paid mortgage insurance plan because you will be paying for the mortgage insurance for the life of the loan in the form of a higher interest rate with this type of loan.

Conventional interest rates are slightly higher than government loan options like FHA mortgages and VA mortgages, but if your credit score is good, then conventional loans can still be a better option.  The reason is that FHA loans carry mortgage insurance no matter how much you put down on your home, and VA loans have a funding fee that you must pay.

Conventional mortgage rates are calculated with a couple major factors- your credit score and your percentage down payment.  A higher credit score will help you obtain a better rate, with the best category being above 740, where as a lower score will cause the rate to be higher.

The amount of down payment also affects the rate, with a lower down payment causing the rate to be slightly higher, and 40% down payment for the best available rates. 

There are also great conventional refinance options, and if you have an FHA loan currently, then refinancing into a conventional loan can help save you a lot of money by getting rid of PMI.

For questions about your loan scenario, or for a custom, no obligation rate quote, give us a call today at 303-670-0137 or email us!

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