The Ins and Outs of Conventional Mortgages

Conventional mortgages are a widely used financing option for aspiring homeowners. In this comprehensive blog post, we'll take an in-depth look at conventional mortgages, covering their history, qualifications, and critical factors that borrowers should consider.

History of Conventional Mortgages

Conventional mortgages have been a cornerstone of the American housing market for decades. Unlike government-backed loans, such as FHA or VA loans, conventional mortgages are not insured by government agencies. Instead, they are backed by private lenders, with guidelines set by two major players: Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) established to provide stability and liquidity in the mortgage market. They purchase and guarantee conventional mortgages, making it easier for lenders to offer these loans to homebuyers.

Understanding Conventional Mortgages

Conventional mortgages come with unique features and qualifications:

1. Qualifications:

• Credit Score: A minimum credit score of 620 is typically required for conventional mortgages, but higher scores may lead to better interest rates.

• Income: Steady income is crucial, and lenders will assess your ability to repay the loan.

• Debt-to-Income Ratio (DTI): A DTI below 43% is usually preferred by lenders.

• Eligibility: U.S. citizens, permanent residents, and certain non-resident aliens can apply for conventional mortgages.

2. Minimum Down Payment:

• The minimum down payment for a conventional mortgage can vary but is often between 3% and 20% of the home's purchase price.

3. Loan Maximum:

• Loan limits for conventional mortgages can vary by location and may change over time. It's important to check the current limits in your area.

4. Use of Property:

• Conventional mortgages can be used to finance primary residences, second homes, and investment properties.

Are you ready to explore the possibilities of a conventional mortgage? Unsure if you meet the qualifications? We're here to assist you. Take the first step toward homeownership by booking a consultation or completing our client survey. Our dedicated team of mortgage experts is ready to help you find the ideal loan program for your needs. Click and option below to get started!