Conventional Loans

A conventional loan is defined as simply any home loan not backed by a government agency. Many home loans today including FHA loans, VA loans, and USDA loans are backed by the government and are often tailored to borrowers with below average credit scores or limited down payment availability. Conventional loans can be a valuable option for buyers with stronger credit and income or for those interested in a home loan that exceeds the limits placed on government-backed options. Troy Mannella – LNM Lending Team of Security National Mortgage Company offers great rates and terms on conventional loan options to homebuyers throughout Austin, Round Rock, Hutto, and Leander.

Conventional mortgages are classified as either conforming or non-conforming loans. Conforming loans meet the criteria to be eligible for purchase by Fannie Mae and Freddie Mac while non-conforming loans do not. The loan amount is generally the first thing that is looked at when determining if a loan is conforming or non-conforming. Loans greater than $453,100 are not eligible for purchase and are therefore non-conforming loans. In certain high-cost areas, loans can reach as high as $636,150 while still being considered conforming.

Historically, conventional loans in Texas have required down payments of 20% or more. Conventional loans can be found today with down payment requirements as low as 3%. It is important to note that a 20% down payment allows buyers to forgo private mortgage insurance (PMI). PMI may still be required if a lower down payment option is preferred. Once 20% equity is reached, you can cancel this insurance. Mortgage insurance often cannot be cancelled on government-backed loans such as FHA loans.

Credit score, income, and debt-to-income (DTI) ratio requirements will vary from lender to lender. Buyers interested in low down payment options may need a credit score in the 700 range while those who can make a larger down payment may be approved with a significantly lower score. The exact requirements will depend on each buyer’s unique financial situation.

You will find conventional loans with fixed-rate, adjustable-rate, and hybrid rate options. Many homeowners prefer fixed-rate mortgages as they offer long-term stability and peace of mind. Your monthly payment with a fixed-rate mortgage will never change. If you choose to go with an adjustable-rate mortgage (ARM), the interest rate on your mortgage will vary from time to time based on the market. ARMs typically start out with lower rates than fixed-rate mortgages. Buyers with plans to relocate or refinance in the near future may find that an ARM is their best option.

Troy Mannella – LNM Lending Team of Security National Mortgage Company offers great rates and flexible terms on conventional loans throughout Austin, Round Rock, Hutto, and Leander. Whether you are purchasing your very first Texas home, or refinancing your existing mortgage, we can tailor a conventional loan to meet your exact needs. For more information on our conventional loan products, contact us today.