What is Conventional Loan?
The Conventional loan is the most common type of mortgage that is not insured by any government agency such as the Federal Housing Administration or the Veterans Affairs Department. This could either be used to purchase or refinance a residential property. Like any other loans, it has advantages and disadvantages depending on the case and the transaction. But oftentimes conventional loan is the most beneficial loan program especially if the borrower has all the qualifications; they get to enjoy the best features of a conventional loan. However, if a homeowner who wants to refinance their home with not-so-stellar credit will not be able to take advantage of its benefits, unless he or she has more than 20% equity on the property.

Conventional loan can bring you savings in so many ways and it is so broad that it would be difficult to sum it all up in just one article. There are many things to tackle and there are other loan products that need to be uncovered which are part of the conventional loan; like the Fannie Mae or Freddie Mac conforming loan program which could either be fixed or adjustable and the different terms if it is 40, 30 or a 20 year amortization.

Another thing that needs to be discussed is the mortgage insurance, though in some cases MI is paid by the lender wherein they create their own conventional loan leaving the homeowner clueless that they are not getting the full benefits of the loan.

Therefore, it is wise to get a strong mortgage broker that will help you shop the loan with many different banks and be able find the right one that would perfectly fit the homeowner’s qualifications and needs and that would give the best benefit.

As always, seek the help of a professional. It will save you time, effort and money because they will provide you free advice and they will even do an initial evaluation of your current situation to help you make the right decision. The professional should also be able to answer all your questions and must provide straight forward answers. And most of all, the professional must be duly licensed by the Department of Real Estate and NMLS and must be able to provide as many references as possible.

For Conventional – Conforming
Down Payment: Minimum of 3%
Credit Score: 620 and Above
Loan -to-value Ratio: 97%
Debt-to-Income-Ratio: Borrowers must have 45% or less debt-to-income ratio to qualify if loan-to value exceed 80%, if it does not exceed 80% DTI goes up to 50%.
Maximum Loan Amount: $417,0000

For Conventional – Conforming
Down Payment: Minimum of 20%
Fico Score: Minimum of 720
Loan -to-value Ratio: Maximum of 80%
Debt-to_income Ratio: Maximum of 40%
Reserves: 12 month PITI for jumbo / 3 month PITI non jumbo
NO BANKRUPTCY
NO FORECLOSURE

Advantages:
Can be used on any Type of Property
More Loan Program Options
No Maximum Loan Limit
Preferable loan for highly qualified individuals

What is Conventional Loan?
A loan which is not guaranteed by the federal government and is not issued by any government entity. It can be a fixed rate mortgage, adjustable rate mortgage, and balloon mortgage.

Types of Conventional Loan?
REGULAR: Allows a borrower to obtain a loan as little as 3% down payment as long as it has MI when the loan to value exceeds 80%. Meets the funding criteria of Fannie Mae and Freddie Mac.
CONFORMING: Mortgage loan that conforms to GSE guidelines.
HIGH BALANCE CONFORMING: For buyers in expensive areas with mortgage limits over $417,001 and could range up to $625,500 depending on the county.
NON CONFORMING: Mortgage loans that does not meet bank or lender’s criteria.
JUMBO: Mortgage that exceeds conforming limit which is not eligible to be purchased and guaranteed by Fannie Mae and Freddie Mac.
LENDER PAID MORTGAGE INSURANCE: It is a way to avoid paying traditional mortgage insurance where the lender pays the mortgage insurance in return for a little increase in the interest rate.

Employment and Income:
HOW THE INCOME IS CALCULATED TO QUALIFY FOR CONVENTIONAL LOAN?
Last 2 years of total gross income including variable income like bonus and overtime, divided by 24.
JOB REQUIREMENT:
- Must have steady employment for the last 2 years.
- Same line of work for the last 2 years.

Conventional Process:
STEP 1:
Can be used on any Type of Property:
1 day (it will depend on the cooperation of the borrower)
STEP 2:
Pre-Approval:
With all documents it will take 24 – 72 hours(depends on the complication of the income of the borrower)
STEP 3:
Submissions and Approval:
With all documents it will take 24 – 72 hours(depends on the complication of the income of the borrower)
STEP 4:
Final Loan Documents:
3-4 Days from Loan Approval, if all parties involved are pro-active.
STEP 5:
Closing: 72 hours
STEP 6:
TOTAL TIME FRAME IN A PRO-ACTIVE SCENARIO: 14 Business Days