Conventional Loan Basics
As the name implies, a conventional loan is the most common form of loan that Houston mortgage companies offer. They are sometimes known as “conforming loans,” because they conform to same rules as loans backed by the federal government. For customers with very good to excellent credit, conventional loans generally offer a more competitive rate than FHA loans. A conventional loan lets you
- • Purchase a single-family home, condominium.
- • Refinance with a home equity loan to make improvements on your property.
- • Buy a second home or investment property.
To find out what the you can do with a conventional loan, choose from the topics on the right to learn more about
Credit Score: An excellent credit score is needed for low and competitive rates and generally you’ll end up needing a credit score of 620 or higher.
Debt-to-Income Ratio: We recommend a debt-to-income ratio of less than 43%
Cash Reserves: A decent savings remaining that will be there after closing costs.
A Strong Proven Work History: It’s very important that you can prove you have maintained a strong work history with proven income. b
By now you’re probably aware of the benefit of a good credit score.
Building excellent credit is an essential part of what some lenders call the pre-pre-approval stage.
Here’s the reason. When you have excellent credit, you get a better mortgage loan rate. The lower the rate, the less interest you pay, essentially meaning that you build equity and increase your net worth faster than someone in the same situation who is paying a higher rate.
- •Check the credit report to make sure there are no mistakes, and write the reporting agencies to correct discrepancies.
- •Use instalment loans, like credit cards, to establish a proven record that you can pay your debt. Always pay at least the minimum, and always pay on time.
- •Don’t apply for new debt — your score decreases every time lenders or employers run a credit check.
- •Use a company that allows you to self-report regular payments from your checking account — rent and utilities, for instance — as additional proof of your responsible financial habits when you meet with a mortgage lender.
First-time buyers receive expert advice during the pre approval process from start to finish. With new mortgage loan requirements in effect in 2014, first time buyers must have five percent and up to two months worth of cash reserves.
With new mortgage loan requirements in effect in 2014, first time buyers must have five percent and up to three months worth of cash reserves.
Some options for first-time buyers:
- •Getting a gift from a friend or family member.
- •Taking money from an 401K to purchase the home.
- •Using an FHA or VA loan, if you meet the eligibility requirements,which requires a lower down payment.
A conventional home loan may be used to purchase additional properties, such as vacation homes or early retirement properties. You can purchase a second home as an additional personal property, or you can buy an investment property.
Buying a second home can be an excellent investment.
There are different mortgage loan rates and tax implications, depending on whether you designate your home an investment property or second home.
If you are considering taking this step, we would be happy to help you navigate the process.
Navigating Conventional Loans
Buying a home is an exciting, and challenging process. The financing itself can feel intimidating, especially if you are a first-time buyer. Nevertheless, a prequalification letter is a must in today’s competitive Houston real estate market. Contact Corey or Daron, or fill out our online application, to get the process started.