Are you looking to purchase a home, and have distinct borrowing specifications for your current financial situation? Conventional loans are a great home financing option that are entirely backed by private lenders, and have lots of great mortgage offers, with adjustable terms and rates. Our skilled team at Foundation Mortgage can work closely with you to guide you through the various conventional loan options. If you are in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, give us a call today for a mortgage quote.
What Is a Conventional Loan?
There are two main types of loans: conventional loans, and non-conventional loans. Non-conventional loans, such as FHA loans or VA loans, are backed by the federal government. Conventional loans, on the other hand, are insured through private lenders, not the government, and the insurance is usually paid for by the borrower.
Conventional loans are divided into 2 categories: conforming and nonconforming loans. Government-sponsored entities, (GSEs), such as Fannie Mae and Freddie Mac, can purchase conventional loans from lenders and consolidate them for sale to investors. These GSEs have a maximum loan limit, which varies across the U.S., but is generally around $510, 400. If the loan is under that amount, it is considered a conforming loan. Non-conforming loans, also known as “jumbo loans”, exceed that GSE limit. Because they aren’t backed by the government, conventional loans can pose a higher risk to lenders and often have selective approval requirements for home buyers. Conventional loans also usually require a higher down payment than a non-conventional loan. Despite these matters, conventional loans offer many great benefits.
Benefits of a Conventional Loan
When purchasing a home, there are many advantages to securing a conventional loan. Some of the benefits include:
- Low interest rates, with fixed and adjustable rate options
- Fast loan processing
- Reduced private mortgage insurance, (PMI), and no PMI with a 20% down payment
- Multiple down payment options, some as low as 3%
- A variety of term rates, between 10-30 years
How Do You Qualify for a Conventional Loan?
In order to qualify for a conventional loan, there are specific requirements that must be met by the home buyer. Our mortgage specialists at Foundation Mortgage can work with you to assess your current financial situation, and help you understand the loan qualifications to decide what options work best for you. The requirements for a conventional loan typically include:
- A credit score of 620-640
- A minimum required down payment of 3%, however, if your credit score is lower, you may have to put down a higher amount
- A total debt-to-income (DTI) ration of 36%-43%
- Verifiable income (tax returns and W-2 forms) from the past 2 years, typically
Looking For Your Suitable Conventional Loan
If you think a conventional loan could be the best home-buying option for you, contact Foundation Mortgage today for a free consultation. We can assist you in finding your dream home in the Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg areas of Tennessee.