Are you currently in the market for a home, and in the process of deciding on the best financing option to fit your current situation? Conventional loans can be an excellent home financing option because they offer flexible terms and competitive rates. If you are searching for a home in Jacksonville, Florida, the skilled team at North Star Mortgage Network, Inc. can help you understand your conventional loan options and guide you through the process. Read on to learn more about conventional loans.

What Are Conventional Loans?

ralph-ravi-kayden-2d4lAQAlbDA-unsplash (2)Conventional loans are mortgages that are insured by private lenders and are not regulated by a government agency like FHA or VA loans, which are classified as non-conventional loans. Since they are not backed by the government, conventional loans tend to pose a higher risk for lenders, so the qualification requirements are more stringent than non-conventional loans. Conventional loans are separated into two categories; conforming and nonconforming. Government-sponsored entities, (or GSEs), such as Freddie Mac and Fannie Mae buy conventional loans from lenders and consolidate them to sell to investors. These GSEs have a maximum loan limit, which can vary across the United States, but is typically set at $548,250. If the amount for a loan falls below the loan limit, it is considered a conforming loan, however if the loan is above the GSE loan limit, it is classified as a nonconforming loan. These nonconforming loans pose a high risk for a lender due to their significant amount, and usually have even stricter qualifications and require a 20% down payment.

What Are the Advantages of a Conventional Loan?

Conventional loans offer many benefits for a borrower, including:

  • Lower interest rates with both adjustable rate and fixed rate options
  • Reduced private mortgage insurance, (PMI), and no PMI requirement with a down payment of 20%
  • Quick loan processing
  • A variety of term rates ranging between 10 and 30 years
  • There are a wide variety of down payment options available, with some even as low as 3%
  • You can receive funding for high value homes with nonconforming mortgages like super jumbo or jumbo loans

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Requirements for a Conventional Loan

The common requirements for a conventional loan include:

  • A down payment of at least 3%, however, if you have a lower credit score, you may have to put down a higher down payment amount
  • A minimum credit score of 620 – 640
  • You must provide income verification and tax information from the past two years
  • A debt-to-income ratio, (DTI), of 36% – 43%

Get Assistance With a Conventional Loan

If you are ready to purchase a home and interested in obtaining a conventional loan in Jacksonville, Florida, contact North Star Mortgage Network, Inc. today for a consultation. We can help you determine the best financing option for your situation.