What is a conventional mortgage?
What is a conventional mortgage?
A conventional mortgage (or sometimes known as a conventional loan) is a type of home buyer’s loan that is only available through a private lender. This means that it can be offered by a bank, a mortgage lender, or even a credit union. In most cases, a conventional loan is not offered through a government entity. There are two exceptions to this; conventional mortgages that are guaranteed by the Federal National Mortgage Association (known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac). A conventional loan will generally use FNMA and FNMA guidelines.
A conventional mortgage is usually offered with a fixed or variable rate of interest. A fixed rate means the interest rate does not change no matter when the mortgage was first taken out, while variable rates can change over time. However, since they have a fixed or variable rate of interest and are not guaranteed by the federal government, they usually have strict lending requirements that are set by the creditors and banks in Florida.
Am I eligible for a conventional mortgage?
Lenders have tightened the requirements for a conventional mortgage since the late 2000s. However, it may be possible for you to obtain one assuming you meet the strict criteria set by the lenders. The first thing a lender will check is likely your asset, liabilities, and also your income. The monthly payments will be relative to your income to ensure you can afford it. In most cases, your monthly mortgage payments will cap out at 28% of your gross income for the month, depending on the lender. This is in addition to whatever the down payment is. There may also be other up-front costs such as underwriting fees, brokerage fees, settlement costs, or loan origination. These can increase the overall cost of a conventional mortgage. As such, it’s important to understand what you’re paying for when you seek out a conventional mortgage in Florida.
What do I need for a conventional mortgage?
In order to apply for a conventional mortgage, you’ll need to supply a couple of documents. In addition, your lender will likely perform a background check to see how healthy your credit rating is. If you have not built a high enough credit score, then it may be difficult to be accepted for a conventional mortgage. Generally, you can expect lenders to request the following documentation:
- Proof of income, such as pay stubs, federal tax returns, W-2 statements, or quarterly statements of all asset accounts.
- Bank and investment account statements to show that you have the required funds for a down payment. In some cases, lenders may also calculate closing costs and consider your cash reserves.
- Proof of identification such as your Florida driver’s license and your social security number.
- Proof of your employment if applicable. This will typically be bundled together with your proof of income. This is necessary to show that you have a stable work history.
If you lack any of this information, then you may be unable to apply for a conventional mortgage.
Who should consider a conventional mortgage?
A conventional mortgage can be a great option if you want to purchase a home, but this isn’t the only option available. In most cases, you’ll need to check that you’re eligible for a conventional mortgage by contacting a specialist such as Mortgage Quote. If you have a fantastic credit history, then you might be a good candidate for a conventional mortgage. Ideally, you should have a high credit score and no poor history of delinquent debt. You should also have an acceptable debt-to-income ratio. This is essentially the sum of your monthly debt payments compared to your income. The calculation takes into consideration things such as your credit card bills and loan payments.
If you qualify for a conventional mortgage in addition to other types of loans, then you may be interested in comparing your options, MortgageQuote.com can help you do this. The most common alternatives include Federal Housing Administration (FHA) loans and United States Department of Agriculture (USDA) loans for rural areas and VA loans for veterans. This is where Mortgage Quote can help you see which mortgage option can better serve your needs and financial situation.
If you’re interested in learning more about conventional mortgages, don’t hesitate to get in touch with us today. Mortgage Quote can help you take the first steps to get pre-approved for a mortgage. With our free mortgage quotes and advice, we help homeowners every step of the way to achieve their own home.
Conforming vs Conventional Loans
Conventional Mortgage or Loan