Why should you opt for conventional loans in Texas? Read below to know the requirements and benefits of conventional house loans.
A conventional loan is a mortgage that is not guaranteed by the government. Many lenders provide “conforming loans,” a sort of conventional credit that adheres to Fannie Mae and Freddie Mac’s requirements. These two government-sponsored businesses then purchase mortgages from lenders, lowering the lender’s risk and generating liquidity for more loans. Some lenders also provide conventional loans in Texas that are “non-conforming.” You should visit more than one lender and ask for quotes before choosing a suitable one.
Many first-time homebuyers believe that a 20% down payment is required to qualify for a conventional loan. That is simply not the case. Down payments on conventional loans can be as little as 3%. Mortgage insurance is not needed for purchasers who put down 20% or more. Conventional loan qualifying requirements are less lenient than FHA loan qualifying criteria.
Requirements for A Conventional Loan
Lenders have different approval standards. These are the general requirements for single-family house purchases include the following:
- A high credit score is required.
- A comprehensive exterior and interior evaluation were just completed.
- Maintain your existing work during the loan procedure and avoid making large expenditures, such as a new vehicle.
- There are no prefabricated or mobile houses permitted.
Alternative to A Conventional Loan
Don’t give up if you don’t fulfill these traditional loan criteria. A government-backed lending program might still help you purchase a home. FHA loans offer a lower credit score requirement of 580 for a 3.5 percent down payment, so you might be able to buy a home with just a little more money saved up. USDA and VA loans demand no down payment and have liberal credit score criteria. You may also be able to use gift cash from family or friends if you qualify for down payment assistance programs.
Advantages of Conventional Loans
- Loan processing may be faster since you are not subject to any additional government procedures.
- For first-time home purchasers, down payments as low as 3% are available. Mortgage insurance is not required for down payments of 20% or more.
- Borrowers with strong credit and a sizable down payment will benefit the most from traditional loans.
- Some government loans contain additional costs or mortgage insurance requirements that are not present in regular loans. For traditional loans, private lenders establish their costs. Before applying, learn more about government programs.
- Conventional house loans are the way to go if you want to buy an investment property or a second home because government-backed loans, such as USDA, VA, and FHA, do not allow that property uses.
- Increased maximum borrowing limits. Conventional loans offer larger loan limitations than FHA loans, so you may be able to finance a more costly house.
Do you have any remaining concerns regarding traditional loans? A professional loan specialist can assist you in determining if a conventional or government loan is the best option for you. They may also go through all of your interest rate, term, and closing cost choices with you.