My Home Loans Offers Conventional Loans
If you’re currently searching for a home in El Paso and are considering your options when it comes to home loans, we’d like to help you better understand your choices. We know it can feel overwhelming with the various items to consider and how they will affect you in the long term. Our role as a trusted home loan provider in El Paso is to match you with a loan that best matches your unique situation. One loan you’ll want to consider is a conventional loan. This type of loan comes with many incentives and can allow you to move through the buying process much quicker than other loan applications.
What is a Conventional Loan?
A conventional loan is not part of any of the government programs such as the Federal Housing Administration (FHA), Department of Veterans’ Affairs (VA), or the Department of Agriculture (USDA).
There are two primary types of conventional mortgages:
- Conforming loans: There are more strict guidelines when it comes to conforming loans. They follow the rules set by Fannie Mae and Freddie Mac.
- Non-conforming loans: Your debt-to-income ratio should be lower than it would be with a regular loan. Often 43% is considered a good guideline. Moreover, lenders may require additional documentation based on the size of the loan.
As your home loan lender in El Paso, we will help you understand which type makes more sense for you and your situation as well as how these requirements will affect you.
How Do Most Conventional Loans Work?
There’s an advantage to living in a city like El Paso where homes are generally affordable, compared to larger cities like Los Angeles or Seattle. As a potential homebuyer in El Paso, the loan limits of a conventional home loan are well within reach. As of 2018, the conventional loan limit is set at $453,100. This varies based on location, and the limit can be raised based on the home’s units. For example, a 4-unit home can have a limit of $871,450. Beyond that, for multi-unit homes in cities with a higher cost of living, loan limits are set even higher.
Key Requirements Associated with Conventional Home Loans
- Down payment. Although it is advised to give as much as 20%, a down payment of 3% is the minimum requirement.
- Proof of stable income. Lenders may require a monthly mortgage that does not exceed 28% of your gross monthly income. Additionally, your monthly payment when combined with other debt payments such as student loans, credit card bills, and car loans) can be limited to a maximum of 36% of your gross monthly income.
- Excellent credit score. Typically, borrowers with a credit score of 620 or higher are considered candidates for conventional loans.
Why Should You Consider a Conventional Loan?
Home buyers who meet the basic qualifications are encouraged to seek a conventional home loan given that their monthly home mortgage can be low. Additionally, with these loans, you won’t have to worry about rising mortgage interest rates. As with any home loan, there are benefits and drawbacks. Consider these facts to help you better determine which route to go.
Benefits associated with conventional home loans:
- Fast home loan turn around. The home loan processing with conventional home loans tends to be faster than other home loans since there is no need to wait for government approvals. There are also fewer complications involved in these short approval processes.
- Avoid a mortgage insurance premium. Mortgage insurance premiums (MIPs) are more common in loans with lower down payments. However, if you put a downpayment of 20 percent or higher, you can avoid an MIP.
- Low mortgage interest rates. As a conventional home loan lender, we are often able to lower the interest rate based on your qualifications.
Here are the primary drawbacks:
Harder to qualify. With more strict guidelines, qualifying for a conventional loan may not be feasible for everyone. That doesn’t mean you should lose hope. Remember, there are many more loan options to consider.
Required to pay closing costs. Unlike an FHA loan, there is no one to foot the bill when it comes to closing costs. This means that you are required to pay all closing costs, no matter how expensive.
The Bottom Line — Are Conventional Loans Right For You?
If you have an excellent financial history, then a conventional loan is absolutely the way to go. Your credit history and ability to afford a large down payment indicates that you can garner benefits of being a homeowner early-on. Most importantly, this type of mortgage insurance premium puts you at an advantage compared to other home loans.
Learn More About Our Conventional Loans
If you meet the general requirements of conventional home loans, there are many benefits you will reap from this loan. Connect with us today to learn more about getting started. We’re always happy to answer initial questions and guide you in the right direction. Even if this type of loan isn’t right for you, we do our best to find you one that is. Please give us a call today to learn more.