CONVENTIONAL HOME LOANS

A conventional loan is ideal for those who make larger down payments and have a stronger credit profile. Unlike government backed loans (FHA,VA,USDA), conventional loans are not insured by government agencies. So they conform to underwriting guidelines set forth by Fannie Mae and Freddie Mac. Therefore, you will find that the higher the credit score, the lower the interest rate. Times have changed, so this isn’t your 1980’s conventional loan. You don’t need 20% down. In fact, this is a big misconception about conventional loans. 

Many recent changes have expanded the available pool of mortgages to buyers through conventional loans.Bear in mind, if you are buying an investment property you will need a conventional loan. Sometimes condos (unless FHA/VA approved) require that you buy using a conventional loan as well.

Cool Tidbits About Conventional Loans

  • Fixed and adjustable rate terms
  • Down payments can be gifted
  • Private Mortgage Insurance (PMI) can be avoided (ask about this)
  • Standard down payment starts at 5% down
  • 3% Down payment options available
  • Lender independently approves condo units
  • Second mortgages can be taken to avoid the need for PMI
  • Buy a 2-4 Unit Property, while living in one-unit
  • Finance renovation costs at the time of purchase or refinance

Advantages of getting a conventional mortgage loan in Denver:

  • Interest rates can get better as your score climbs from 680-740 ~ Other variables play into consideration, but score does matter with a conventional loan
  • Those who don’t plan on staying put, may want to consider an adjustable rate mortgage (A.R.M) to align their financial strategy to the time they’ll own the loan.
  • Private Mortgage Insurance (PMI) monthly cost typically goes down as you put larger down payments(3%,5%,10%,15%,20%). Other variables such as score and debt ratios can impact this as well.
  • Private Mortgage Insurance (PMI) can be removed without refinancing your home. Although, there are time, payment history, and equity considerations still at play.
  • Non-conforming options exist for those who need to borrow more money. Typically referred to as Jumbo loans.
    Conventional home loans usually take less time to process than FHA loans, since there’s less documentation required.
  • Conventional mortgages that require mortgage insurance, do not necessarily have to be refinanced to remove mortgage insurance (pro-tip).
  • You can use a conventional home loan to investment and rental properties.
  • Conventional home loans can be more flexible with repayment terms if you qualify.
 

Eligibility for a conventional home loan in Denver

 

Many factors come into play with the decision to take out a conventional mortgage in Denver. Every borrower’s situation is different, and underwriters take several components into consideration when deciding to approve the loan. There are some baseline eligibility requirements:

  • Credit Scores. Applicants for a Denver conventional home loan are required to have a minimum credit score of at least 620. Keep in mind that a score of 620 is considered “poor” in the context of a conventional home loan; a borrower with that score will probably pay a significantly higher mortgage rate.Conventional home loans are ideally suited for those with credit scores over 680; those whose scores top 740 stand to pay the lowest mortgage rates available.
  • Debt to income ratio. A borrower’s debt to income ratio is the total minimum monthly payments they owe on various debts—credit cards, auto payments, student loans, child support, and so forth—divided by their monthly gross income, reflected in percentage terms. Conventional loan borrowers’ debt to income ratio can be no higher than 50%; most lenders prefer to see ratios of 45% or less.
    Employment history. As a rule of thumb, applicants for a Denver conventional home loan need to be currently employed and have at least two years of income history. If someone who’s currently employed has gaps in their history, they may need to be at their current position for at least six months.Lenders may evaluate other factors, such as education or pending job offers, if the borrower doesn’t meet that requirement.
  • Current income. There’s no minimum/maximum income limit for a conventional mortgage in Denver. However, the borrower’s current income is evaluated along with all other factors. Lenders want to be assured that applicants’ earnings are enough to afford the mortgage they’re applying for and are in line with local income expectations.
  • Ability to make down payment. Conventional home loans can be acquired with a down payment of at least 3% of the home cost. Being able to put more down, of course, will lower your monthly mortgage payment, and those who make down payments of at least 20% won’t have to obtain private mortgage insurance.
  • Type of property you want to buy. Properties that are eligible for conventional home loan financing include single-family homes, multi-unit properties up to four units, and homes in planned unit developments. Most condominiums are also eligible, although they may have to meet additional requirements as set forth by the lender; talk to your loan officer or real estate agent to find out.

The process of buying with a conventional home loan in Denver

Acquiring a new home is a complex and time-consuming process. Mortgage Maestro Group is here to assist you at every stage of getting a conventional loan in Denver, from initial evaluation, pre-approval, final loan application, and closing.Our relationship truly begins at the closing table with a pledge to be there for you after closing and in the future as your household financial needs evolve.

1. Determine what you can afford.

The first step is evaluating your financial status and goals to decide what price range you can afford—how much of a monthly payment you can make, and the most you can borrow considering your income and credit history. The Mortgage Maestro Group website features calculators that can help you get an idea of how much you can afford to pay per month. Our loan officers will provide you with several options based on your individual situation based on the current lending guidelines.

2. Apply for pre-approval.

Buyers save a great deal of time and money by having their conventional home loan pre-approved, and Mortgage Maestro Group can help make that happen. You supply us information about your income, employment, residence history, and assets, and authorize us to get your credit report and current score. We evaluate the information you give us and issue a written certification of your pre-approved loan—which your real estate agent can then use to secure the offer you make on your home. During this process, we’ll also research what kind of loan structure will work best for you.

3. Make an offer and apply for the loan.

When the home seller accepts your offer, it’s time to officially apply for the loan, which you can do right on the Mortgage Maestro Group site. After you’ve applied, we’ll arrange to get a full appraisal of your new home’s value. Submit your loan to the underwriting team, and work with you to obtain the final approval, so that you can move on to the closing stage!

4. Close and move in.

With your mortgage loan cleared for closing, your lender works with the assigned title company to administer the closing and exchange of final funds between the parties. Mortgage Maestro Group works on your behalf, and with the title company to facilitate this process, ensuring all the documentation is set for the date of closing—taking much of this load off your shoulders so you can focus on moving in.

Mortgage Maestro Group helps you through all the steps and documentation of applying for and securing a conventional home loan in Denver. Contact us to find out more.

Conventional loans or an FHA loan?

For many this is an ambiguous question when they start the process of getting pre-approved to buy a home. What factors make conventional loans better for one than an FHA loan would be? When does FHA apply better to someone compared to a conventional loan? How are the two loans different? How is mortgage insurance different between the two loan types? Which of the loan types allows higher debt ratios? Which is more forgiving on credit? For some basic information on a comparison, check out this blog

Why choose Mortgage Maestro Group for your conventional loan?

The Mortgage Maestro Group is a locally operated mortgage bank with years of experience. We have helped thousands of homeowners navigate the seas of conventional loan options. Our guiding light is that.we work with honesty and integrity every step of the way. Don’t just take our word for it, check Google here. When it comes to conventional loans aligning with the right structure and strategy can help you avoid costly borrower mistakes. Make sure you are working with a lender that explains and educates you on the options available to you.