Quikfund Conventional Loans
Conventional home loans are those that are not backed by a government entity such as the Department of Veteran’s Affairs, FHA (the Federal Housing Administration), or the USDA. Instead, these loans follow the guidelines set up by Fannie Mae and Freddie Mac. These agencies have helped to standardize the mortgage industry in the United States. Alternately, FHA loans are those backed by the Federal Housing Administration, and VA loans are those backed by the Department of Veteran’s Affairs.
The conventional mortgage is a common choice among borrowers and may be the right loan type for you depending on a number of factors, but the most important factor being your credit score. If your score is 620 or better not only will you likely qualify for a conventional home loan, but your interest rates and PMI will drop as the score increases. Furthermore, your MIP (mortgage insurance premium) disappears once the loan is paid to 80% value, which is something to consider.
Another benefit of conventional home loans is that they also allow for the seller to contribute up to 3% of the purchase price toward the buyer’s closing costs, but that will only happen if you ask. If you ask for 3% and the costs are only 2%, the seller will get to keep that 1% extra, which is a plus for them, so be sure to make that request before papers are drawn up.
If you happen to have a lower credit score FHA loans or VA loans may be better options for you. But if you are leaning toward making sure you qualify for a conventional home loan you’ll want to work on your credit score.
One of the major issues that affect your credit score is your debt-to-income ratio. For the 6-12 months before you apply for a traditional loan make sure that you make a monthly payment regularly on at least one account, and try to pay all others off quickly. Do not close any accounts, or open any new ones. Doing all of these things will help to bring up your credit score. It may take a few months for you to see the score go up, but slowly and surely, it will.
Mortgage lenders of all types like to see that their customers are making an effort to improve their score, no matter what the loan type or loan amount. The lenders at Quikfund will do everything possible to ensure you can get the loan you need for the house you want, no matter the situation. If a traditional loan is the route you want to take, they’re here to help you take that first step on your journey to homeownership.