In Spite of the fact that the FHA has been in the economic news recently, Palm State Mortgage has found that it is not the first choice among today’s borrowers in the Florida market. According to our company president, Pearl Lefkowitz, “If credit and asset able, most borrowers are opting for Conventional 95% financing instead of FHA financing, with the current high cost of FHA mortgage insurance.”

You might want to click to catch the details of that article, just to know about the new economic trends behind the higher costs of those loans.

As we reported in our most recent blog, the FHA mortgage insurance rates are increasing. It might be making the economy stronger, but it might also make your mortgage payment higher.

Back To Basics: Conventional Mortgage Loans

“A conventional mortgage is the most common way to finance a home. This type of mortgage can be both fixed or variable rates and involves the mortgage holder paying both principal and interest on the loan every month.”

For today, we of Palm State Mortgage Company thought it would be a good idea to share five vital and  informative points about the Conventional Loan, sort of our “Beginner’s Guide To Conventional Mortgage Loans.”

For some of our readers, this might seem basic, but we know some will find it a good review of essential financial knowledge.

To put it simply, if you are a borrower, conventional loans are perfect if you have these fundamental qualifications:

1. Excellent Credit

At the very minimum, you will need 620 FICO score is generally required to obtain approval for conventional loans. Conventional Loan guidelines state that if you have a 740+ credit score, you can often obtain the best available interest rate. (In other words, you can get a really good deal!)

If your credit score decreases below 740, watch out for sizable fees and rate increases up to 1-2%.

We know “life happens,” and your credit scores might be less than excellent, in which case you might shop for another type of loan. At Palm State Mortgage, we will readily explain and review your options.

2. A Substantial Down Payment:

Conventional Loans usually require a higher down payment (usually 5% – 20%) than the other loan types. (Look on the bright side, the higher down payment will help your equity to grow faster!)

3. Income Considerations: You will need to analyze your budget. When you put pencil to paper and do the math, ask yourself: Do I have enough income to pay all housing costs plus all my additional debts and essential living expenses? Do not simply take into account the mortgage principal, but its interest, your taxes, your insurance and upkeep on the home.

4. Limit Yourself!

You might ask, “So, just how much can I borrow?” You should know that “The maximum house loan amount allowed for a Conventional Conforming Loan varies from county to county.”

The highest maximum Conventional Conforming Loan available currently in any county is $729,750. The lowest maximum Conventional Mortgage amount available in any county is $417,000.”

Our Advice: Never ask what you could borrow, but what you should borrow.

To take a look at the limit in your county, you can visit this helpful source.

5. Most Conventional Loans Are Fixed Rate Mortgages:

What this essentially means is that you can count on your mortgage payment being the same amount, month after month. In an adjustable rate mortgage (ARM,) your payments start low, and then increase as the life of the loan goes on.

These are our top five indispensable factoids about conventional loans, currently, if there were such an award, Palm State Mortgage would give it the people’s choice award. When the credit score, down payment and other qualifications are met, this is a good path to take to the American dream of home ownership.

We thank you for reading our blog today, and we hope it has answered a few questions about the process of the Conventional loan. You can check out more home loan advice at this special page on our website.