Are you thinking about purchasing a home and trying to decide on a financing option that best suits your current situation? You may want to consider a conventional loan, which is a great financing option that offers flexible terms and competitive rates. The loan specialists at Foundation Mortgage can help understand the variety of conventional loan options that are available and help you find excellent rates. If you are interested in purchasing a home in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact our team today for a consultation.
Conventional Loan Basics
Home loans are separated into two categories, conventional loans and non-conventional loans. Conventional loans are insured through private lenders and are not regulated by the government. Conversely, non-conventional loans are backed by federal agencies such as the Department of Veterans Affairs (VA), and the Federal Housing Administration (FHA). Since conventional loans are not backed by the government, they are riskier for lenders, so qualifications for a conventional loan tend to be stricter than non-conventional loans.
There are two main types of conventional loans; nonconforming and conforming. Conventional loans can be purchased by GSEs (government-sponsored entities) such as Freddie Mac and Fannie Mae, and there is a maximum loan limit in place for these loan types. The loan limit varies from state to state, but the loan limit is approximately $548,250. If the mortgage total is under the maximum loan limit amount, it is considered a conforming loan. Nonconforming loans, such as jumbo or super jumbo loans, exceed the maximum loan limit amount, and are typically funded by private institutions, not Fannie Mae or Freddie Mac. Even though the requirements are more stringent, conventional mortgages come with a variety of benefits, including: competitive interest rates and adjustable rate options, low private mortgage insurance, (PMI), and if you are able to put down 20%, you are not required to pay PMI, fast loan processing, a variety of down payment options and a wide range of terms.
Requirements for a Conventional Loan
Typical requirements for a conventional loan include:
- A minimum credit score of 620-640
- A minimum down payment of 3%
- A debt-to-income ratio (DTI) of 36% or lower
- You must be able to provide documentation of income from the past 2 years
Get Help Obtaining a Conventional Loan
If you are interested in purchasing a home in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and want to know more about your financing options with a conventional loan, Foundation Mortgage can help. Our loan specialists can work closely with you to determine your current financial situation and offer you home financing guidance that can help put you in your dream home.