Choosing to purchase your own home is a life-changing decision that requires plenty of forethought. However, there’s a bewildering array of information to navigate, from MLS listings to home insurance policies. One of the most important aspects of the entire process is figuring out how you will be paying for your home. Most people opt to borrow — that is, take out a mortgage — to finance the purchase. Even then, consumers have a multitude of affordable home loans to consider.
One of the most common of all mortgage types is known as a conventional home loan. Is this mortgage right for you, your family and your budget? Read on to learn more.
Conventional loans are not only common. They’re also popular with both first-time and experienced home buyers. These mortgage loans are especially attractive due to their interest rates typically being set lower than government loans (i.e. FHA, VA, USDA) or non-conforming loans (i.e. jumbo). But what most sets conventional home loans apart from other kinds of mortgages (such as FHA, VA and USDA home loans) is the fact that they aren’t insured by the federal government. Instead, these types of loans must conform to requirements laid out by Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) that are publicly chartered but privately owned.
Conventional loans are similar to other types of mortgages in that homebuyers can choose from a variety of terms. Such terms include fixed mortgages spanning 30, 15 and 10 years as well as adjustable-rate mortgages (ARMs). An ARM is a loan whose interest rate can vary during the loan’s term. These loans adhere to a fixed interest rate for an initial period of time (usually 3, 5, 7 or 10 years) and then typically adjust on a yearly basis. Fixed and adjustable-rate mortgages each come with their own advantages and disadvantages. Ask your Loan Consultant which home loan product best fits your financial circumstances and goals
As with all mortgage products, applicants for conventional home loans must meet specific requirements in order to qualify. Conventional home loans have a reputation for being among the more difficult mortgages to qualify for, but that is a myth. Those paying for their home purchase with a conventional home loan make up about 46 percent of the market.
When applying for a conventional loan, be prepared to furnish information about your finances, employment and the source of your funds for your down payment. You’ll need to provide your Loan Consultant with pay stubs, W2s, tax returns and more (the requirements are more stringent for those that are self-employed). Once you’ve turned in your paperwork, it’s time to consider the down payment you can afford.
Many people assume that they’ll need to come up with 20 percent of the purchase price of their home to qualify for a conventional loan, but that’s not necessarily the case. Although many real estate experts recommend putting as much as down as possible to avoid paying mortgage insurance, qualify for a lower interest rate and lock in the most affordable monthly payment, a down payment of 20 percent or more is not always a requirement for securing a conventional home loan.
In fact, some conventional mortgages allow applicants to qualify even if they pay as little 3 percent down. Some lenders even offer special programs that allow for down payment assistance via a second mortgage or bond program to qualified borrowers.
So, if you have satisfactory credit, can afford the required down payment, closing costs, and monthly mortgage payments, and are looking to pay off your mortgage as quickly as possible, a conventional home loan may be ideal for you.
Before you begin the search for your dream home, reach out to a Loan Consultant to see if a conventional home loan will work for you. It’s advisable to start exploring your mortgage options as soon as you know you’re ready to start shopping.
A Loan Consultant at Caliber Home Loans, Inc. ("Caliber") can help you get on the right path to homeownership. Our Loan Consultants pride themselves on their hands-on, customer-driven approach to lending. By combining extensive knowledge of local real estate markets with the strength and reliability of a national lender, Caliber offers stability, security, and peace of mind to anyone looking for a property to call “home sweet home."
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*Closing cost offer available to customers who apply for a new purchase loan. Only available for single family primary residences and existing Caliber customers. Credit provided at closing. The offer is nontransferable and can only be used by the intended recipient. Advertised discount can only be applied toward payment of closing costs up to a total amount of $1,000 subject to product underwriting guidelines. Any portion of the discount amount not used toward closing costs will be waived. |
| **A pre-approval does not signify that all underwriting requirements have been met. Actual terms, including interest rate, are subject to change without prior notice and may vary based on eligibility criteria. All products are subject to credit and property approval. Not all products are available in all states or for all dollar amounts. Please contact Caliber for additional details. |
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| ***The lock will be honored up to 75 days total. Your rate is protected for up to 30 days to shop for a home. Once you identify a property, your rate will be locked for an additional 45 days. All rate lock extensions are subject to Caliber’s standard rate lock extension fees All rate lock extensions are subject to Caliber’s standard rate lock extension fees. Not available for all loan products. Please contact Caliber for additional details. |
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| ****Caliber agrees to pay the borrower the amount of the earnest money deposit (up to $5,000) following the home loan closing, if the loan does not close on or before the contract closing date due to a delay caused by Caliber. Void if there are any material changes to income or assets. Offer requires 30 business days from Caliber’s receipt of purchase contract to closing date. Other requirements include: Minimum 700 credit score, owner occupied purchase transaction. LTV and property type restrictions may apply. Available only through the Caliber Retail Channel. Payment may be subject to reporting for tax purposes. Please contact Caliber for additional details. |
