What is a Conventional Loan, and is it right for me?
Conventional Home Loans, also referred to as A-Paper Loans, are traditional home loans with the strictest guidelines. They are usually only for those with Excellent credit and 20% saved for a down payment, or more than 20% equity established on your home. Conventional mortgages are a great option to purchase a home with and a great loan to refinance into, once you have the 20% equity. With 20% down or 20% equity, Conventional loans do not have mortgage insurance, which is the single biggest benefit of a traditional Conventional Loan. Conventional Loans are subject to industry loan limits.
Conventional Loans are the best option when you have:
At least 20% Down
Conventional Loans carry no mortgage insurance when you put 20% down while purchasing. This can greatly reduce your payment
Conventional Loans perform the best for clients with Excellent credit. Generally the best conventional loans are for borrowers with 720+ FICO score.
Greater Than 20% Equity
Conventional Loans are great to refinance into when you have 20% or more equity. After hitting the 20% equity mark you can refinance and get rid of your mortgage insurance!
Low Debt-to-Income Ratio
Conventional Loans have strict income requirements. But if you fit into their mold, you can gain huge benefits in regards to interest rate.