• J. Charles Lending

    J. Charles Lending

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    NMLS# 2409480

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    Conventional Mortgage Topics Covered

    San Antonio conventional mortgage

    What is a Conventional Mortgage?

    A conventional mortgage is one that’s not guaranteed or insured by the federal government. Instead, they are available through private lenders, such as banks, credit unions, and mortgage companies.

    Conforming conventional loans must fall within the limits set by Fannie Mae and Freddie Mac. As of 2022, the limit is $647,200. If the loan surpasses that limit, it becomes a jumbo (nonconforming) loan.

    Usually, you’ll be able to borrow more money on a conventional loan than on a FHA loan.

    Potential borrowers must complete an official mortgage application, then supply their lender with the necessary documents to perform an extensive check on their credit, income, and assets.

    Conventional mortgages can be structured in many different ways. Fixed rate or adjustable, as little as 3% down payment or more than 20%, escrows included or not, your J. Charles loan officer will answer all your questions and present options so that you can make a good financial decision.

    Conventional Mortgage Requirements

    Documentation Needed to Get a Conventional Mortgage

    • Proof of income and assets.
    • Employment verification.
    • A valid social security number.

    Other Requirements

    • Have a FICO credit score of at least 620 (this number may vary from lender to lender).
    • Make a down payment.
    • Have a debt-to-income (DTI) ratio of less than 50%. This means that your total monthly debt payments can’t be more than 50% of your pretax income (includes debts that you aren’t actively paying).
    • In the case of a conforming conventional loan, your loan must fall within the limits set by Fannie Mae and Freddie Mac.

    Down Payment

    The requirement for a down payment can vary based on your personal circumstances and the kind of loan or property you’re getting. First-time home buyers have the possibility of acquiring a conventional mortgage with a down payment as low as 3%.

    • If you’re not a first-time home buyer, the down payment requirement is 5%.
    • If you’re a second home buyer, the requirement is 10%.
    • In the case of a jumbo loan, the down payment requirement ranges from 10% to 40%.

    San Antonio conventional mortgage

    Private Mortgage Insurance

    If you choose to make a down payment of less than 20% on a conventional loan, you’ll be required to pay for private mortgage insurance (PMI), which protects your lender in case you default on your loan. This is different from FHA loans, where you have to pay an upfront mortgage insurance premium (UFMIP) and an annual MIP.

    Your PMI is typically included as part of your monthly mortgage payment, but there are other ways to cover the cost as well. There’s the option to pay it as an upfront fee, or, alternatively, in the form of a slightly higher interest rate.

    When you reach 20% equity on your home, you can ask your lender to remove the PMI from your mortgage payments. Once you reach 22% equity, though, the PMI will automatically be removed.

    Different Types of Conventional Mortgages

    • Conforming – meets loan standards set by Fannie Mae/Freddie Mac. For clarification: the FNMA (Fannie Mae) and the FHLMC (Freddie Mac) are home mortgage companies created by the U.S. Congress. They make the mortgage market more affordable and stable, and they provide liquidity to thousands of loans, banks, and mortgage companies in America.
    • Nonconforming – (like a jumbo loan, for example) doesn’t meet the loan standards set by Fannie Mae/Freddie Mac. Oftentimes, jumbo loans require a higher credit score than conforming ones do.
    • Fixed Rate – for as long as you have the mortgage, the interest rate will remain the same.
    • Adjustable Rate – (also referred to as hybrid ARMs) rates change annually, after staying fixed for a set amount of years.
    • Low Down Payment – more flexible than other types; you can get a down payment as low as 3 or 5 percent.

    Advantages of Getting a Conventional Loan

    • The interest rates tend to be lower.
    • There are more options in terms of down payment.
    • Overall, these loans can be very flexible as most of them don’t need to follow the guidelines set by government agencies.

    San Antonio conventional mortgage

    Frequently Asked Questions

    What types of homes can I purchase with conventional financing?

    Conventional loans allow you to purchase single family homes, condos, investment properties, townhomes, lofts and 2nd vacation homes.

    How much can the seller pay towards my closing costs?

    Typically the seller can pay 3% of the sales price towards closing. If you put a down payment over 10% they can pay up to 6% towards your closing. This is assuming that your home purchase is for a primary residence. Investment properties are capped at 2% allowable seller paid closing costs.

    If my credit score is low, how can I raise it?

    Paying your bills on time, reducing your credit balances, and trying to not apply for credit too often are all ways that you can raise your FICO score.

    How long does it take to purchase a home?

    The normal turn time for a purchase is about 30 days.

    Questions? Contact J. Charles Lending Today!
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    Contact J. Charles Lending

    J. Charles Lending

    1100 NW Loop 410 Suite 700
    San Antonio, Texas 78213
    (210) 209-6792
    NMLS# 2409480

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