Conventional Loans
Conventional
loans are the best loans in terms of interest rates and fees. Conventional
loans require a down payment of 5% or more. Loans with a loan-to-value
(LTV) ratio of 80% or greater will require the borrower to purchase
Private Mortgage Insurance. Conventional loans can have a fixed rate
or an adjustable rate. Qualifying for a conventional loan requires a
strong credit history and a smaller DTI (Debt-to-Income) ratio. A DTI
ratio is the measure of all of your debts and your mortgage payment
divided by your gross income. Conventional loans generally require this
percentage to be no greater than 41%.
Conventional
loans can be “conforming” and “non-conforming”. Conforming
loans follow the guidelines of Fannie Mae and Freddie Mac. Nonconforming
loans do not follow these guidelines, but are also considered conventional.
The conforming loan limits are $417,000, equal to that of VA and FHA
loan limits. Jumbo loans are also considered conventional, and
are loans greater than $417,000.