What is a Conventional Mortgage?

A conventional mortgage is any type of mortgage loan that is not offered or secured by a government entity, like the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) or the USDA Rural Housing Service. This type of mortgage is available through or guaranteed by a private lender (banks, credit unions, mortgage companies) or the two government-sponsored enterprises, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

With recent changes to conventional financing guidelines this mortgage program is a strong competitor to FHA financing. The main difference being that FHA mortgage insurance remains on the loan for the life of the loan, conventional mortgage insurance is cancellable when the loan-to-value reaches 78%.

Benefits of applying for a Conventional Mortgage at Commonfund Mortgage

  • Have a debt-to-income ratio (DTI) (the sum of your monthly obligations compared to your monthly income) of 45% and up to 50% on a case by case.
  • Have a minimum down payment of 3% for owner occupied property. A down payment of less than 20% of the purchase price normally requires Private Mortgage Insurance which Commonfund Mortgage will obtain.
  • Investment properties: Single family minimum 15% down/ 2-4 family minimum 25% down.
  • Seasonal second homes with 20% down payment and can be located on a private road without central heating.
  • Non-occupying co-signers allowed to help borrower qualify.
  • Credit scores as low as 620 allowed but will have negative interest rate price adjustments.
  • 1st and 2nd mortgage combinations available to avoid PMI or jumbo loan pricing.
  • No monthly mortgage insurance loans are available with only 5% down.
  • Effect of student loan payment for qualifying varies from FHA to conventional mortgages. Ask your loan officer for specifics.

 

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