For prospective homebuyers, trying to decide what type of loan to apply for can be a bit challenging. Two popular types are Federal Housing Authority (FHA) and Veterans Administration (VA) loans. FHA loans are geared toward low- to middle-income borrowers. If the borrower is serving or has served in the military, a VA loan may be the right fit.Another option for borrowers is the conventional mortgage. If you’re a borrower who has strong credit, the conventional mortgage might right for you.
What is a conventional mortgage?
These loans are offered by most lenders. They differ from VA and FHA loans in that they aren’t insured by a government agency. Conventional mortgages often meet down payment and income requirements set by Fannie Mae and Freddie Mac. Those two institutions are sponsored by the US government and they provide money for the housing market.
To qualify for a conventional mortgage, borrowers will need a credit score of at least 620. However, the higher the credit score, the better the rates they could get. Rates are also determined by how much of a down payment a borrower makes. As little as 3 percent is required but rates can improve if a borrower puts more down.
Conventional mortgages fall into two categories: Conforming and nonconforming
Conforming loans follow Fannie Mae and Freddie Mac guidelines and one of the guidelines is a limit on the loan amount. For a single-family home, the limit for much of the country is $548,250. However, some areas such as Alaska, and parts of California and Colorado have higher limits.
Some nonconforming loans are called jumbo loans. These loans are for potential borrowers who want to borrow more than the conforming limit permissible in their geographical area. Rates for jumbo loans are typically higher than other types of loans and may carry additional fees or insurance requirements.
At Better Lending, we are committed to guiding you through the loan process with as little stress as possible. Call us at 888-400-1373 to speak with one of our loan advisors.
Borrowers are allowed to have Private Mortgage Insurance (PMI) removed from a home loan in two ways, automatically or by request.
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