Understanding Conventional Mortgages
Are you considering purchasing a new home and exploring your mortgage options? One popular choice is the Conventional Mortgage. This type of mortgage offers several advantages, including flexibility, competitive interest rates, and various down payment options. Let’s dive into the details of Conventional Mortgages and the key features they offer.
What is a Conventional Mortgage?
A Conventional Mortgage, often referred to as a Conventional Loan, is a home loan that is not guaranteed or insured by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, it is offered by private lenders and is underwritten based on the lender’s criteria and guidelines.
Key Features of Conventional Mortgages
1. Minimum FICO Score of 600:
- To be eligible for a Conventional Mortgage, you typically need a minimum credit score of 600. However, having a higher credit score can improve your chances of securing a more favorable interest rate.
2. 3% Down Payment:
- Conventional Mortgages offer the flexibility of a 3% down payment option. This means you can purchase a home with as little as 3% of the home’s purchase price as a down payment. This is a significant advantage for homebuyers who may not have the means to make a larger down payment.
3. Single Premium MI Option:
- Conventional Mortgages also provide the option to include Single Premium Mortgage Insurance (MI). MI helps protect the lender in case you default on your loan. By choosing the single premium option, you can pay the MI premium upfront at closing, which may lower your monthly mortgage payments.
4. No Maximum DTI with DU/LP Approval:
- Conventional Mortgages can offer more flexibility in your debt-to-income (DTI) ratio. Some borrowers may qualify for a Conventional Mortgage without a maximum DTI limit if they receive approval from automated underwriting systems like Desktop Underwriter (DU) or Loan Prospector (LP). This allows for a more personalized approach to your financial situation.
5. Down Payment Assistance Program:
- If you need additional help with your down payment, you may be able to take advantage of a Down Payment Assistance Program. These programs, often offered by state or local agencies, can provide financial support to eligible homebuyers, making homeownership more accessible.
Why Choose a Conventional Mortgage?
Conventional Mortgages are an excellent choice for those who have a good credit score, as they offer competitive interest rates and flexible down payment options. With the ability to customize your mortgage with or without Single Premium MI and the potential for no maximum DTI with automated approval, Conventional Mortgages can be tailored to fit your unique financial situation.
If you’re considering a Conventional Mortgage, make sure to consult with a mortgage lender or a financial advisor to explore the available options and determine the best fit for your home buying needs.
Are you ready to explore the world of Conventional Mortgages and take a step closer to homeownership? Contact us today to learn more and get started on your home buying journey.