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The Best Conventional Mortgage For You!

Conventional Loans

At Loan Fox Inc., we specialize in many different loan types around the Country. One of the most common loan types in today’s housing market is a conventional loan. A conventional loan is one of the most traditional loan types provided by private lenders.


Conventional loans adhere to the guidelines established by the two public government-sponsored enterprises (GSE's), The Federal National Mortgage Association, (FNMA) also known as Fannie Mae and The Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac, corporations established by the federal government, whose purpose is to buy and sell conventional mortgage loans. They are responsible for setting the maximum loan amounts and requirements or guidelines, that borrowers must meet in order to qualify. They make the rules that lenders must conform to in order to sell their loans into the secondary market and into bundles known as Mortgage Backed Securities (MBS) which are traded on the open market.

A conventional loan is typically a 30-year fixed rate mortgage. but can have other fixed or adjustable terms as well. They also normally require a 20% down payment when getting started. This means that 20% is paid initially and the remaining 80% of the home value will be financed by the lender.


Conventional loans are great for those who can afford the 20% down at the beginning of the loan term and looking for a lower interest rate. Borrowers who cannot afford the initial 20% down can still use conventional loans but must have mortgage insurance to compensate for the reduced down payment. (See Mortgage Ins info below ) Conventional Mortgage insurance is preferable to FHA or any other program and is rated by credit score so costs less for those with better credit. For those with higher credit and lower debt ratios/ more income, conventional loans are preferred.


To ensure qualification for a conventional loan, a borrower should have a debt-to-income ratio of 28 for housing alone and 36 including all required expenses added to the house payment, which includes the minimum payment only for all installment and revolving lines of credit that report to the credit report - Items not on credit are not included as liabilities in the debt ratio - . and a middle credit score of 620 or higher.


 However, this does not mean that a borrower will not qualify if they do not meet those metrics. The Automated Systems are composite compensating systems and debt ratio is flexible when there are other compensating factors such as higher credit scores and reserve assets in the bank after closing for example. Conventional debt ratios can exceed 43 and sometimes go up to 50% - Call for details.


When determining your interest rate for a conventional loan there are several factors that will come into play. An interest rate will be different depending on which conventional loan program a borrower qualifies for, their middle credit score, the loan size, the term, the location of the property, the amount available for a down payment.and the fees charged to the borrower upfront, aka origination fees, rate buydown or discount fees.


Sellers can contribute to the buyers closing cost but it is limtted to 3% which is considerable less than FHA which allows 6% - If closing costs contributions above 3% are required FHA would be a better option.


To see if you qualify and real time live interest rates, please contact one of our 16 Loan Fox locations here.

A conventional loan is typically a 30-year fixed rate mortgage. but can have other fixed or adjustable terms as well. They also normally require a 20% down payment when getting started. This means that 20% is paid initially and the remaining 80% of the home value will be financed by the lender.


Conventional loans are great for those who can afford the 20% down at the beginning of the loan term and looking for a lower interest rate. Borrowers who cannot afford the initial 20% down can still use conventional loans but must have mortgage insurance to compensate for the reduced down payment. (See Mortgage Ins info below ) Conventional Mortgage insurance is preferable to FHA or any other program and is rated by credit score so costs less for those with better credit. For those with higher credit and lower debt ratios/ more income, conventional loans are preferred.


To ensure qualification for a conventional loan, a borrower should have a debt-to-income ratio of 28 for housing alone and 36 including all required expenses added to the house payment, which includes the minimum payment only for all installment and revolving lines of credit that report to the credit report - Items not on credit are not included as liabilities in the debt ratio - . and a middle credit score of 620 or higher.


 However, this does not mean that a borrower will not qualify if they do not meet those metrics. The Automated Systems are composite compensating systems and debt ratio is flexible when there are other compensating factors such as higher credit scores and reserve assets in the bank after closing for example. Conventional debt ratios can exceed 43 and sometimes go up to 50% - Call for details.


When determining your interest rate for a conventional loan there are several factors that will come into play. An interest rate will be different depending on which conventional loan program a borrower qualifies for, their middle credit score, the loan size, the term, the location of the property, the amount available for a down payment.and the fees charged to the borrower upfront, aka origination fees, rate buydown or discount fees.


Sellers can contribute to the buyers closing cost but it is limtted to 3% which is considerable less than FHA which allows 6% - If closing costs contributions above 3% are required FHA would be a better option.


To see if you qualify and real time live interest rates, please contact one of our 16 Loan Fox locations here.

Conventional Mortgage Insurance Options

Borrower-Paid Mortgage Insurance

With borrower-paid mortgage insurance (BPMI), the borrower pays the MI premium, either monthly or as a single upfront premium. Single premiums may be financed into the loan. Borrowers can qualify for a loan with a smaller down payment, enabling them to purchase a home sooner.

Borrower Paid Monthly Premium

Full premium on a monthly basis with nothing upfront at closing. Best for situations where property is appreciating and borrower may have funds to pay down the balance of the loan under 80% in order to be cancelled. Does not count toward the cap on closing costs.


Single Premium or Single Financed Premium Mortgage Insurance

Borrowers can pay a one-time lump sum payment, or if they don't have sufficient funds at closing, Single Financed Premium lets them finance their MI into the loan amount. This attractive option offers a low monthly payment and reduces the amount necessary at closing. Single Financed Premium MI is best for borrowers who want to minimize their monthly payment. Non-refundable does count as a closing cost and is non-cancellable, but Refundable Mi does not count toward closing costs and is cancellable.


Split Premium

By splitting the MI cost into an upfront premium and a smaller monthly renewal, Split premium dramatically reduces a borrower's monthly MI payment, which can help qualify for a larger loan. Monthly portion can be cancellable, Upfront portion counts toward closing costs limits if not refundable.


Lender-Paid Mortgage Insurance

Lender-paid mortgage insurance (LPMI) benefits you and your homebuyers. With LPMI, you pay the MI premium on the borrower's behalf, while charging a slightly higher interest rate on the loan. LPMI benefits borrowers by eliminating MI closing costs and monthly MI premiums and also provides these additional benefits: Basically a rate increase. This cannot be cancelled or adjusted for the life of the loan without refinancing and is best in a depreciating market.

FHA Mortgage Insurance

FHA Mortgage Insurance works differently than conventional Mortgage Insurance in a couple of different ways.

See the FHA Loans page for more dretails

Speak to a loan officer today about conventional loans. Click here to find a branch near you.

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