Conventional Loans

A conventional loan is defined as any home loan not backed by a government agency. Many popular home loan programs such as FHA loans, VA loans, and USDA loans are backed by various government agencies. These types of home loans are often tailored to borrowers with limited down payment availability or less than perfect credit scores. Limits are also placed on the size of the loan available through these programs. Conventional loans on the other hand can be the perfect option for buyers with stronger credit and income or for those who need a loan that exceeds the limits placed on government-backed alternatives. 5 Star Financial Group offers great rates and terms on conventional loan options to homebuyers throughout Tampa, Riverview, Valrico, Wimauma, and nearby Florida areas.

Conventional mortgages will fall into one of two categories. Conforming or non-conforming loans. Conforming loans are ones that are eligible for purchase by Fannie Mae and Freddie Mac. Non-conforming loans on the other hand are not eligible for a number of possible reasons. The loan amount is generally the first thing that is looked at when determining if a loan is conforming or non-conforming. $484,350 is the conforming loan limit in most cases. In certain high-cost areas, loans can reach as high as $726,525 while still being considered conforming.

Traditionally a 20% down payment has been required for conventional loans. Today you can find conventional loan options with down payment requirements as low as 3%. There are benefits to making a larger down payment though. Perhaps the most important is that a 20% down payment allows buyers to forgo private mortgage insurance (PMI). PMI will most likely be required if you choose to make a smaller down payment. Once 20% equity is reached, you can cancel the PMI, however, the mortgage insurance on government-backed loans such as FHA loans cannot be cancelled at any time.

Lenders will have different requirements when it comes to credit score, income, and debt-to-income (DTI) ratio. There may be some flexibility in each of those areas depending on the size of the down payment and each borrower’s unique financial situation. For example, a larger down payment may allow someone to be approved with a lower score than someone who opts for a smaller down payment option.

Conventional loans are available with fixed-rate, adjustable-rate, and hybrid rate options. Many homeowners will choose to go with a fixed-rate mortgage as they offer long-term stability and peace of mind. With an adjustable-rate mortgage (ARM), the interest rate will vary from time to time based on market conditions. ARMs typically start out with lower rates than fixed-rate mortgages. Buyers who plan to to relocate or refinance within a few years of their purchase may find that an ARM is their best option.

5 Star Financial Group offers great rates and flexible terms on conventional loan throughout Tampa, Riverview, Valrico, and Wimauma. Whether you are purchasing your very first Florida home, or refinancing your existing mortgage, we can tailor a conventional loan to meet your exact needs. For more information on our conventional loan products and services, contact us today.