Conventional Loans in Sacramento
If you have good credit, a steady income, and can afford a down payment, then a Conventional Mortgage might be the best solution for you. It may also be easier and faster to close than a government-backed mortgage. Conventional loans often offer lower interest rates as well.
Conventional loans can be used to finance just about any type of property, whereas some condo complexes and uncommon houses can not be approved for FHA financing. You can use Conventional Financing to buy a second home or a rental property.
A common myth is that you must make at least a 20% down payment in order to qualify. The reality is that conventional financing allows you to get a mortgage with as little as 5% down, with private mortgage insurance (PMI). Unlike an FHA Loan, once you reach 20% equity, PMI ceases without having to refinance. Plus PMI rates are usually lower for conventional loans than with FHA loans.
Conventional Loans are available with Adjustable Rates or fixed rates with your choice of terms - 1 to 7 Year ARMS, 10, 15, 20, 30 Year fixed. With Conventional Financing you have a smorgasbord of options!
What Are the Typical Qualification Requirements?
Some basic requirements for conventional loans include:
- A 620 or higher credit score
- Total debt to income ratio of 43% or less
- Housing debt to income ratio under 35%
- No recent bankruptcy, repossession, foreclosure, or short sale
- Down payment must come from an allowed, documented asset source
- Verifiable income; W-2 forms and tax returns, typically 2 years' worth with exceptions for recent graduates and other major life events
Conventional loans are also known as conforming loans because they “conform” to Fannie Mae and Freddie Mac standards. Freddie Mac is a government-owned corporation that buys mortgages and packages them into mortgage-backed securities. Its official title is the Federal Home Loan Mortgage Corporation or FHLMC. Banks use the funds received from Freddie to make new loans to homebuyers.
Freddie Mac and Fannie Mae are both creative acronyms for congressionally created home mortgage companies. The Federal Home Loan Mortgage Corp. became Freddie Mac and the Federal National Mortgage Association became Fannie Mae.
More than 60% of home buyers use a conventional loan!
Loan amounts are limited and subject to change. Most counties within California have a 2020 conforming loan limit of $510,400 for a single-family home. Higher-priced areas, like those in the San Francisco Bay Area, have conventional limits of up to $765,600 due to higher home values. CALL for current limits.
If you were able to save up a good size down payment, a conventional loan may be perfect for you. It could even save you some money!
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