If you’re looking for a conventional loan, we’re here to help!
Gulf Coast Bank Home Loans offers conventional mortgage loans in areas we serve including metro New Orleans & Baton Rouge as well as Tennessee, Florida & Texas.
How a Conventional Loan Works
A conventional loan is a popular choice for a home loan because, generally speaking, the loan program offers competitive rates and terms.
You may see terms like FNMA when researching conventional loans, but don’t be confused as these loans are NOT insured by the government. The eligibility requirements tend to be more restrictive than those for government-back loans such as an FHA, VA, or USDA mortgage.
Conventional loans can be conforming or non-conforming. A conforming conventional loan follows the guidelines set by Fannie Mae and Freddie Mac. They also follow the loan limits set by the Federal Housing Finance Agency (FHFA). Click here to see the current FHFA maximum loan limits.
A non-conforming conventional loan does not meet these guidelines. A jumbo loan is a good example of a non-conforming loan. If you are looking for a loan amount in excess of the FHFA, please ask a loan officer about your options.
Who Can Get a Conventional Loan?
Borrowers with good credit scores, verifiable income and available assets for a down payment will have a better chance to qualify for a conventional loan.
What are the Qualifications for a Conventional loan?
Here is a summary list of key qualifications for a conventional loan:
- Reasonably good credit
- Down payment of at least 3% for qualified properties and borrowers
- Income that can be verified through independent sources. at least two years of W-2 forms and tax returns
Conventional loan guidelines are updated from time to time, and each loan is considered on its own merit. If you have any questions about how these guidelines may apply to your loan application, please get in touch with a loan officer near you today.
What You Should Know About Conventional Loans
Conventional loans do not follow standard guidelines for down payments. The minimum will generally vary between 3% to 20% of the home’s sale price or appraised value.
A down payment of less than 20% will require the borrower to pay private mortgage insurance (PMI). PMI protects the lender in the event that the borrower defaults on the loan.
PMI can be rolled into your monthly mortgage payment, paid as a lump sum, or a combination of these two. Three of the major factors in your PMI mortgage premium costs are your credit score, loan-to-value (LTV) ratio and your debt to income ratio.
You can avoid paying PMI if your down payment is at least 20% of the purchase price. Otherwise regulations require that the servicer drop the MI once your loan balance reaches 80% of the original value or sale price.
Benefits of a Conventional Loan
If you are considering a conventional loan, here are some of the benefits that may be relevant to you:
- Flexible terms
- Adjustable-rate mortgage options
- No upfront mortgage insurance fees such as those associated with FHA, VA, and USDA mortgages
- Eliminate monthly mortgage insurance with at least 20% down payment
- More flexible guidelines for property appraisal analysis.
Do you have any questions?
Gulf Coast Bank Home Loans has branches in metro New Orleans and Baton Rouge as well as Loan Production Offices in Tennessee, Florida & Texas.
If you are ready to get started, you can pre-qualify today.