Conventional Loan?
The term “conventional loans,” refers to mortgages that are offered by private lenders, as opposed to government-sponsored lenders. We can advise you as to whether any of these types of loans are in your best interest. Some examples are listed below.
Conforming conventional loans are backed by the Government-Sponsored Enterprises (GSEs) Freddie Mac (Federal Home Loan Mortgage Corporation) and Fannie Mae (Federal National Mortgage Association). However, non-conforming conventional loan borrowers do not meet the requirements set forth by the GSEs. Usually this occurs because the mortgage loan amount is so large it exceeds the regional GSE maximum of $424,100 (for most regions). This is referred to as a “Jumbo Loan”. These non-conforming conventional loans, or jumbo loans, are usually accompanied by higher interest rates than their conforming counterparts.
Why we love
Conventional Loans
*Some restrictions apply
Down Payment*
3-5% down for owner occupied, 10% down for Second Home, 15% down for investment property. Typically, 20% is required to eliminate PMI at closing.
Occupancy Type
Primary, Second-Home, Investment, and Family Opportunity Mortgage (elderly parents or disabled child), etc. Each occupancy type has their own set of guidelines/rules.
Debt-to-Income Ratio
As high as automation underwriting system (AUS) allows (typically between 45-49% with strong credit)
Max Loan Amount
Maximum loan amount is $726,200
Minimum Credit Score*
Minimum credit score is 620
Gift Funds Allowed*
100% allowed
Recast*
Yes* – A Recast is the process of submitting and applying a large principal payment on a closed loan and using the new reduced loan balance to re-amortize the existing monthly mortgage payments over the remaining term of the loan.
Grant/Bond Program*
Yes* – It is important to note that grant or bond programs are income, credit, and debt to income limited.
Cash Out Refinance
In Texas, Conventional financing is the only program that allows a Cash Out Refinance
Appraisal Guidelines
Depending on the risk factors associated with the property and strength of the loan (ie- down payment amount, debt-to-income ratio, employment, and assets) the automation underwriting system might waive having an appraisal done on the home. This is called Value Acceptance Waiver and the borrower can choose to bypass having an appraisal.
Bankruptcy
(Chapter 7)*
Four years after discharge*- If there is more than one BK filed in the past seven years, the waiting period is five years from the last one. If a foreclosure occurred in the Chapter 7, the time period goes to a seven-year waiting period.
Bankruptcy
(Chapter 13)
A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows: two years from the discharge date, or four years from the dismissal date.
Contributions
The seller is allowed to pay up to 3% of the sales price toward the closing cost and prepaids. If the buyer is putting 10%+ more down, the seller is allowed to pay up to 6% of the sales price toward the closing cost and prepaids. For an investment property, the seller is maxed at 2% of the sales price toward buyer’s closing cost and prepaids. Seller contributions cannot be applied towards the down payment amount.
Tax Liens
Delinquent credit, including tax liens, mechanics’ or material men’s liens, and liens that have the potential to affect Fannie Mae’s lien position or diminish the borrower’s equity must be paid off at or prior to closing. However, if a lien has not been filed and approved payment plan has been established, then specific guidelines must be followed.
Private Mortgage Insurance (PMI)
Conventional loan borrowers who are unable to meet the 20% down payment requirements typically must pay PMI. PMI factors are based on the down payment, credit score and DTI (Debt to Income). Fairway utilizes the Top six PMI companies in the industry. Conventional also has some options to eliminate PMI without putting 20% down for strong credit/good DTI customers.
this loan
is right for you?
Take a look at our loan comparison page here to find out more about other loan types and get a better feel for which one fits your needs best!
This may vary depending upon the specific type of mortgage you are applying for, as different agencies will need to be involved in the process. Typically the process plays out in a month or less, though some will go quicker. It is not uncommon to have the mortgage application processed within 10 days. It is critical that you get the application entirely completed, so that you can avoid any delays along the way.
The main thing that can delay the approval of a loan is failing to properly and completely fill out the applications. It is also important that you be completely honest on the applications, as any discrepancies may cause delays. In addition, changing jobs, having a change in your salary, changing your marital status or taking on additional debt can delay the approval of a loan.
Closing costs include items such as taxes, title fees and hazard insurance. Sometimes what is included in closing costs varies, and it can be impacted by the negotiation process on the sale price of the home, as the homeowners may or may not cover certain closing costs. You’ll want to have some money set aside to cover your closing costs.
Prepaids are items that you as the homebuyer pay at closing. This is a payment before the actual due date. These may be necessary depending upon the details of the closing. They include taxes, hazard insurance and other various assessments.
After you close, you’ll receive a letter that includes all of the dates and information that you need. If you want further details while you are closing, you should inquire about the specific due date of the first payment.
“Loans are what we do, not who we are.”
– CEO, Steve Jacobson