Conventional loans are the most popular option for most mortgage applicants.
Because they typically feature good rates and lower costs, they are flexible and affordable for most people.
Benefits of a Conventional Loan :
- Conventional loans may be used to purchase a primary residence, a secondary or vacation home, or rental properties.
- Conventional loans are available with either fixed or adjustable rates with typical terms ranging from 10 to 30 years.
- For well-qualified applicants, down payments may be as low as 1%.
- With a down payment of 20% or more, monthly mortgage insurance is generally not required.
- When monthly mortgage insurance is required, the cost is usually less expensive than monthly mortgage insurance for FHA loans.
- Mortgage insurance may cancel-able when your home’s equity reaches 20% or more.
Conventional Loan Options
A jumbo mortgage is a home loan that is larger than the standard conforming loan limits established by Fannie Mae and Freddie Mac.
- High credit score
- Low debt-to-income ratio
- Larger down payment (as low as 10%)
- County-based limits apply
Yes, you heard that right! Trident Home Loans can provide financing to borrowers looking to purchase or refinance a condo. We offer several different condo-financing programs to better assist our borrowers.
- Must be eligible with Fannie Mae
- Must be 100% completed
- Condo HOA Documents required
Lender Credit Option
For borrowers that need to limit their out-of-pocket expenses closing, selecting the Lender Credit Option can help to reduce settlement charges. However, be aware that this will raise the interest rate of your mortgage.
To check your eligibility for a Lender Credit, be sure to speak to your Trident representative before starting the mortgage process.
Best Rate Criteria
To qualify for the best rates on a conventional loan, the following criteria are taken into consideration:
1. Credit Score
The best mortgage rates are offered to borrowers who have an excellent credit history. Generally, a credit score of 760 or above will get the best rates available. With certain exceptions, the minimum credit score needed to qualify for a conventional loan is 620. However, scores in the lower end of this range are generally charged a higher interest rate.
2. Income and Employment History
Applicants that have a verifiable history of stable employment for the previous two or more years will get lower interest rates on a mortgage. A history of declining earnings, extended periods of unemployment or multiple employment changes during the preceding two years all tend to preclude borrowers from earning the best mortgage rates. Be sure to talk to your Trident Home Loans representative to discuss your specific employment circumstances.
Note: If you are self-employed, you may be subject to stricter requirements to prove your self-employment income. At a minimum these requirements include submitting your business income tax returns from the prior two years. Most applicants are also asked to complete IRS Form 4506, allowing the lender to verify the IRS has the same information on file.
3. Debt-to-Income Ratio
Debt-to-income ratio—also known as DTI—is measured by lenders in two ways:
The first method of measuring DTI is called back-end ratio. This is calculated by dividing the total of your monthly minimum debt payments (including your new anticipated housing payment) by your gross monthly income.
The second method of measuring DTI is called front-end ratio. Front-end ratio is calculated by dividing your housing costs by your gross monthly income, and does not consider any other debts you may hold.
To qualify for a conventional loan, lenders prefer a front-end ratio of 28% or less and a back-end ratio of 36% or less.
4. Down Payment
The standard minimum down payment to secure the best rates on a conventional loan is 20% of the purchase price of your home. While it may be possible to go as low as 1%, smaller down payments are generally considered riskier for the bank and carry higher interest rates.
5. Cash Reserves
Your cash reserve is determined by looking at the amount of your current cash savings. This amount includes cash held at your bank in checking and savings accounts, certificates of deposit and money market funds. Funds kept in retirement plans are not generally included, as withdrawing these funds incurs penalties and taxes.
In most cases, lenders like to see liquid cash reserves equal to no less than two months of mortgage payments, including the principal, interest, taxes, and insurance. If other factors mark a potential loan as high-risk, the lender may require a larger cash reserve.