Many banks in the private lending market use conventional loans. A conventional loan is a mortgage that is not backed by a government entity. Therefore, banks can be somewhat more flexible in the terms they choose for their loans. Today we share more information about this mortgage program; you may have an easier time qualifying and get better rates than with other mortgages. Nickel City Funding is here to help Orchard Park, NY homebuyers learn more.
As stated, private mortgage insurance programs often back conventional loans. Non-conventional loans are backed by government-sponsored-entities (GSEs). FHA Loans, VA Loans, and USDA Loans are all examples of non-conventional mortgages.
For conventional loans, since they are not government backed, the private lender will develop their process of approving the loan and measuring risk. Banks will request higher down payments and private mortgage insurance fees in order to protect their investments. There are also many great ways to work with conventional loans.
Customers can negotiate flexible financing terms, and get out of paying private mortgage insurance if there is enough equity in the home. It may be simpler to change the length of the loan in order to stretch your monthly payments. You will also be free from having to go through cumbersome home inspections associated with government-backed programs. Mortgages may also exceed conforming limits with conventional programs.
Conforming versus Non-conforming Loan Terms
Fannie Mae and Freddie Mac establish mortgage amount limits annually. These are the limits of what they will purchase and sell on the secondary market. Loans made under these amounts are known as conforming loans; loans that exceed the limits are called non-conforming. There can be a variety of structures between conforming and non-conforming loans. In addition, limits can vary across different counties in the United States. Areas with more expensive homes can be adjusted to reflect prices.
Non-conforming loans can also sometimes be called jumbo loans. Many lenders may choose to keep this sizeable loan on their books instead of sell it. These loans are riskier for lenders than conforming loans due to their size. Most often, a lender will ask for a 20% or greater down payment to provide the mortgage. A rigorous review of the borrower’s income and assets will ensue to approve the loan. Your debt-to-income ratios, credit score, and payment histories will be scrutinized.
Get Started Today on Pre-Approval for a Conventional Loan
If you want to get pre-approval for a conventional loan, contact Nickel City Funding in Orchard Park, NY. Our talented staff will answer your questions on how you may pre-qualify. Even if you do not think you will qualify, we can provide information on different loan programs.