Chances are if you plan on financing a new home it will be either a Conventional or FHA loan. The main difference is that FHA loans are government backed loans while Conventional loans are not.
As you enter the market for a home loan it is important to not only consult with a qualified mortgage broker but educate yourself as much as possible about Conventional Loans. Please keep reading for important information regarding Conventional Loans in 2020.
A conventional home loan is not backed by a federal agency. FHA Loans, VA Home Loans, and USDA Loans are all backed by government agencies. Instead, Conventional loans conform to standards set by Fannie Mae and Freddie Mac. In general there is more flexibility with a conventional loan than FHA loans. Conventional loans may offer lower interest rates and lower down payments and once you have paid off 20% of the value of your home you can have the premium mortgage insurance (PMI) removed.
In general, if you want to qualify for a conventional mortgage you should meet the following criteria:
The lender will also need to verify:
You will most likely need to supply the following documentation:
Here are some reasons you should consider Conventional Loans:
The Conventional Loan limit for Colorado in 2020 is $510,400 a 5.4% increase from 2019. However, there are counties in Colorado that have a higher limit because of the high average home value. A couple examples include:
Loans above these limits are considered Jumbo Loans.
You can qualify for a Conventional Loan with as little as 3% down while FHA Loans typically require at least 3.5%.
Private Mortgage Insurance (PMI) can add a lot to your monthly mortgage payment. One nice advantage to Conventional Loans is that this can be removed after you have paid off 20% of the value of your home.
Conventional Loans can be used as investment properties or second homes. FHA Loans require the property to be your primary residence.
If you are in the market for buying a home then hopefully the information above can give you an idea of whether or not a conventional loan is a good fit for you. The best way to know for sure is to speak with a qualified mortgage broker. They will be able to answer questions and give you the best recommendation based on your unique circumstances.
Brain Quigley is a trusted mortgage lender in Denver, Colorado and can help you answer these questions related to Conventional Loans. Contact Brian today so you can find the best home loan that fits your needs and get prequalified today.
Once you are pre-qualified you will know how much home you can shop around for.