Why Choose a Conventional Loan?
Most homebuyers choose conventional mortgages because they offer the best interest rates and loan terms - usually resulting in a lower monthly payment. And since most people choose a fixed-rate loan over an adjustable-rate mortgage, they don't have to worry about rising mortgage rates, which makes it easier to budget.
How Do I Qualify?
Without the backing of the government, conventional loan borrowers pose a bigger risk to the institutions who issue the mortgage. As such, borrowers must meet three basic requirements.
Make a sizeable down payment
The standard down payment for a conventional loan is anywhere between 3 and 25 percent of a home's value depending on the borrower's credit and financial condition. For example, a $100,000 home could require a $20,000 down payment.
However, depending on a lender's unique specifications, a borrower may be able to put down as little as 3 percent at closing. Just keep in mind, this option is typically only available to those who meet additional requirements, like being a first-time homebuyer. Remember, with a larger down payment, homeowners also enjoy immediate equity in their home.
Prove a stable income
To qualify for a conventional loan, your monthly mortgage payments and monthly non-mortgage debts must fall within certain ranges. For instance, a lender may require your monthly mortgage payments (which may include taxes and insurance) not exceed 28 percent of your gross monthly income. In addition, your monthly mortgage payments, when combined with your other monthly debt payments (car loans, student loans, credit card bills, etc.), may be limited to a maximum of 36 percent of your gross monthly income.
Have a good credit score
Your credit score also plays an integral role when qualifying for a conventional loan. In fact, most lenders require a minimum FICO credit score of around 620 to obtain approval.
Benefits of Conventional Home Loans
While there are several benefits to securing a conventional mortgage, the type of loan you receive will be driven by factors that may not be in your control - such as FICO scores and other factors described above. However, if you have the option to choose your loan type, there are key advantages. For example:
Faster Home Loan Processing
Conventional loan processing tends to be more streamlined since the borrower deals directly with the lender and isn't dependent on government approvals. As a result, conventional loan applications typically have shorter and less complicated approval processes.
Reduce or Avoid a Mortgage Insurance Premium
It's more likely that you can avoid mortgage insurance premiums (MIPs) with conventional loans than with government insured loans, largely because conventional loans require higher down payments. However, when you put down less than 20%, you will still need mortgage insurance (MI). The amount may be less than what you would pay for a government loans with the same down payment, depending on your credit profile, and other factors.
Lower Mortgage Interest Rates
Private lenders may compete for your business if you are deemed a good credit risk because of income, credit score and other factors. Because of this, you may be able obtain a more attractive interest rate.
Compare Lender Fees
Conventional loans are offered through private lenders and the fees are not set by the government. This means the fees can vary widely among lenders - not necessarily a bad thing since you might save money. The key is to educate yourself and comparison shop.
"Derric does beyond! When I started looking for my first home with a small budget and not sufficient credit score, he looked for all possible options. In addition, I was a picky buyer, (I still am today), I took about 2 years to get one. He was beyond helpful in my loooong home search! Even after the purchase is closed his support is continued and I got a great refinance few yrs later."
Virginia C. San Diego, Ca
"Purchased my first single family home with Derric's help in November 2015 with a VA 30 year fixed loan at a very low rate and great terms. The terms and rate were better than the USAA and Navy Federal loans I had been researching. It was refreshing to deal with someone honest and straightforward. Derric was always available and his turn around on paperwork is appreciated."
Jered S. San Diego, Ca
"As a real estate agent, it's important for me that my homebuyers and refi clients are taken care of. I've worked with other loan officers but nobody can match the kind of service Derric gives to my clients. He goes out of his way to make sure my clients understand the process and status so my clients can make better decision. On top of that, he is pretty honest and will tell you the truth of where your loan stands, no sugar coating."
Jane M. San Diego, Ca
"Derric helped with my home loan and did a great job. I had to do two separate loans and he coordinated them to perfection and the deal closed on time with no problems. I now own my very first home and am just thrilled. Dealing with big banks is a major hassle and Derric had it under control the whole time and dealt with every hassle that the bank threw at him. I would definitely use him again and highly recommend him. Awesome guy."
Stephen B. San Diego, Ca
C2 Financial - San Diego Home Loans
With over 65 years experience in the mortgage industry C2 Financial has some of San Diego's top mortgage consultants, and Derric is one of their best. In 2016, C2 closed more than 2.5 billion in home loans and is rated top 50 mortgage companies to work for by Mortgage Executive Magazine.