The Conventional home loan is still the most popular home loan program used today and for good reason. In many cases, a conventional home loan will provide you with the lowest overall monthly payment and is a good fit for many homeowners. Here are some of the important things you need to know about the program.
Loan Limits
The current conventional loan limit is $417,000 in Maricopa, Pinal and Pima Counties in Arizona. Meaning that this the maximum loan size you can obtain using a Conventional loan.
Down Payment Requirement
If you are purchasing a home to live in as your primary home, the Conventional loan requires a 5% minimum down payment. For a secondary or vacation home, the minimum down payment increase to 10%. And for an investment property, the down payment minimum increases to 15%.
Credit Score
On a conventional loan, the minimum credit score to obtain a loan is 620. However, the interest rate you receive will be dependent on your credit score, meaning that someone with a 760 credit score, will receive a better interest rate that someone with a 620 credit score.
Mortgage Insurance
On a conventional loan, if you make less than a 20% down payment on a purchase or if you are refinancing and have less than 20% equity, mortgage insurance will generally be required. However, there are options to not make a monthly mortgage insurance payment, if you do not have 20% equity, by using lender paid mortgage insurance (which was recently covered in another one of our articles).
Waiting Periods After Major Credit Events
To obtain a conventional loan, you must wait four years after the completion of a short sale and seven years after the completion of a foreclosure to obtain a new conventional loan. In addition, there is also a four year waiting period after the discharge of a chapter 7 bankruptcy to obtain a new home loan.
Debt To Income Ratios
On a conventional loan, there is a basic rule that your debt to income ratio should not exceed 45%, including all monthly payments. This means that if you make $60,000 a year or $5,000 a month, all of your monthly debt payments, including a mortgage, cannot exceed $2,250.
These are some of the basics you need to know about the conventional home loan program, but of course everyone’s individual situation is unique and it is always best to speak with a licensed lender, such as Strategic Mortgage and explore all available options, for your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
Strategic Mortgage, LLC - NMLS#158804- Equal Housing Lender – AZBK#0909514
Vasilios Bill Kamboukos Jr – NMLS#160440
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