Conventional Loans
Conventional loans are the most popular option for borrowers looking to purchase or refinance a home, especially with rates being so low these days. Borrowers may choose between fixed- and adjustable-rate mortgages with terms from 10 to 30 years. Conventional mortgages are not insured or guaranteed by any government agency, such as FHA or VA, but do follow Fannie Mae and / or Freddie Mac guideliens and may be sold to Fannie Mae or Freddie Mac.
Many borrowers enjoy the consistent monthly payment that comes with a 30 year fixed-rate Conventional loan, as this tends to make budgeting easier. However, the 10 or 15 Year Fixed Rate Mortgages offer shorter repayment periods, which can help the borrower own their home sooner and build equity faster, but at the expense of higher monthly payments.
Why Get a Conventional Loan?
*Depending on specific loan characteristics. 3% down applies up to a purchase price of $526,000 with a max. loan amount of $510,400.
TIP: Conventional loans have tightened up recently in regards to credit scores. If you are not putting down at least 10% ands have a lower than 680 credit score, many times it makes sense to use an FHA loan as pricing typically is better on FHA loans with under 680 credit scores.
Conventional loans require as little as 3% down (this is even lower than FHA loans which require 3.5% down). For down payments lower than 20% though, private mortgage insurance (PMI) is required. (PMI can be removed after 20% equity is earned in the home.)
Keep in mind, that the more you put down, the lower your overall loan costs. Your down payment amount helps determine your PMI rate and interest rate, which affects your monthly payment amount and overall interest costs.
Bottom line: The higher your down payment, the less you’ll spend monthly and over the life of the loan.
Credit : It is possible to be approved for a conventional loan after a bankruptcy. There are required waiting periods though, and you must demonstrate that you’ve re-established your credit.
“The lender must determine the cause and significance of the derogatory information, verify that sufficient time has elapsed since the date of the last derogatory information, and confirm that the borrower has re-established an acceptable credit history.”
Fannie Mae Guidelines
Required waiting periods after bankruptcy:
Chapter 7 or Chapter 11: A four-year waiting period, measured from the discharge or dismissal date is required. A waiting period two years is possible, if extenuating circumstances can be documented, such as job loss that is not expected to recur.
Chapter 13: Two years from the discharge date or four years from the dismissal date. With extenuating circumstances, a waiting period of two years is possible from the dismissal date.
A bankruptcy is never a good thing on your credit report, but it doesn’t necessarily disqualify you from ever getting another mortgage.
Eligible properties for conventional financing:
Conventional loans are the most popular option for borrowers looking to purchase or refinance a home, especially with rates being so low these days. Borrowers may choose between fixed- and adjustable-rate mortgages with terms from 10 to 30 years. Conventional mortgages are not insured or guaranteed by any government agency, such as FHA or VA, but do follow Fannie Mae and / or Freddie Mac guideliens and may be sold to Fannie Mae or Freddie Mac.
Many borrowers enjoy the consistent monthly payment that comes with a 30 year fixed-rate Conventional loan, as this tends to make budgeting easier. However, the 10 or 15 Year Fixed Rate Mortgages offer shorter repayment periods, which can help the borrower own their home sooner and build equity faster, but at the expense of higher monthly payments.
Why Get a Conventional Loan?
- Put down as little as 3%*
- Gift funds may be used to help cover down payment and closing costs
- Credit scores as low as 620 may be accepted
- Mortgage insurance buy out may be an option
- Fixed rates offer consistent monthly payments and simplify planning and budgeting
- Better rates for higher credit scores (lower credit scores tend to make an FHA loan more attractive)
- Available for purchase, refinance, or cash-out refinance
*Depending on specific loan characteristics. 3% down applies up to a purchase price of $526,000 with a max. loan amount of $510,400.
TIP: Conventional loans have tightened up recently in regards to credit scores. If you are not putting down at least 10% ands have a lower than 680 credit score, many times it makes sense to use an FHA loan as pricing typically is better on FHA loans with under 680 credit scores.
Conventional loans require as little as 3% down (this is even lower than FHA loans which require 3.5% down). For down payments lower than 20% though, private mortgage insurance (PMI) is required. (PMI can be removed after 20% equity is earned in the home.)
Keep in mind, that the more you put down, the lower your overall loan costs. Your down payment amount helps determine your PMI rate and interest rate, which affects your monthly payment amount and overall interest costs.
Bottom line: The higher your down payment, the less you’ll spend monthly and over the life of the loan.
Credit : It is possible to be approved for a conventional loan after a bankruptcy. There are required waiting periods though, and you must demonstrate that you’ve re-established your credit.
“The lender must determine the cause and significance of the derogatory information, verify that sufficient time has elapsed since the date of the last derogatory information, and confirm that the borrower has re-established an acceptable credit history.”
Fannie Mae Guidelines
Required waiting periods after bankruptcy:
Chapter 7 or Chapter 11: A four-year waiting period, measured from the discharge or dismissal date is required. A waiting period two years is possible, if extenuating circumstances can be documented, such as job loss that is not expected to recur.
Chapter 13: Two years from the discharge date or four years from the dismissal date. With extenuating circumstances, a waiting period of two years is possible from the dismissal date.
A bankruptcy is never a good thing on your credit report, but it doesn’t necessarily disqualify you from ever getting another mortgage.
Eligible properties for conventional financing:
- Single-family homes (detached homes)
- Planned Unit Developments (PUDs), which typically consist of detached homes within a homeowner’s association
- Condominiums
- 2-, 3-, and 4-unit properties
- Manufactured homes
