We genuinely believed that those \u201cdream\u201d houses on the screen were affordable for the average person because, well, <\/span>the average person in the show lives there.\u00a0<\/span><\/i><\/p>\n Before we knew it, we had grown up, paid our dues in life and soon realized that it was time to buy a house.\u00a0<\/span><\/p>\n You quickly became aware of down payment requirements that you wish someone would have told you about years ago, credit scores that have more control over your life than you realized and something called PMI that everyone hates but always talks about.\u00a0<\/span><\/p>\n How did those average people on TV afford such incredible houses?\u00a0<\/span><\/i><\/p>\n We want you to get the dream home that you\u2019ve had your heart set on for all these years. Although it may seem unattainable now, with our help at Volunteer Home Mortgage we will work with you every step of the way to get you there.<\/span><\/p>\n First thing\u2019s first though, we need to understand all of your options as well as which one is <\/span>right<\/span><\/i> for you.\u00a0<\/span><\/p>\n After we get through the ground work, the young grasshopper will become the master and you\u2019ll be ready to call your Realtor to go find your dream house…after we get you qualified, of course!<\/span><\/p>\n In this post, we\u2019ll talk about the 6 things you need to know about conventional loans.<\/span><\/p>\n \u201cDown payment\u201d can sound like a scary term, but there is actually a huge benefit to this requirement…a lower monthly payment. The higher amount of your down payment, the lower your monthly payment will be, however, the lower your down payment, the higher your monthly payment will be.\u00a0<\/span><\/p>\n It\u2019s completely possible for a first-time home buyer to qualify for a conventional loan and there\u2019s even a benefit for them with the opportunity to put as low as 3% down. Just know that your payment will most likely be higher vs someone who put down 5% or 10%.\u00a0<\/span><\/p>\n For someone who is not a first-time home buyer, the down payment minimum is 5%, which is still very low.\u00a0<\/span><\/p>\n Some restrictions:<\/span><\/p>\n If you want an idea of what you can afford as your monthly payment, try a mortgage calculator. The worst thing you could do when purchasing a home is blindly taking out a loan just because you \u201cqualify\u201d for a certain amount. <\/span>The monthly payment is the most important part of taking out a loan.\u00a0<\/b><\/p>\n Here\u2019s a <\/span>loan calculator<\/span><\/a> that we trust.<\/span><\/p>\n <\/b><\/p>\n The beauty of the conventional loan is that it is so versatile.\u00a0<\/span><\/p>\n A 30-year term with a fixed interest rate is typical for a conventional loan, but that is not your only option.\u00a0<\/span><\/p>\n 15-year loans at a fixed rate are one option, as well as 15 or 30-year loans with an adjustable rate.\u00a0<\/span><\/p>\n If you can take on a higher payment, a 15-year loan may be the right option for you and you\u2019ll most likely receive a lower interest rate.\u00a0<\/span><\/p>\n Each loan varies based upon personal situations. You won\u2019t get an accurate idea of what your payment would be until applying for the loan. When you apply with Volunteer Home Mortgage, we show you what your interest rate will be as well as your monthly payment so you know exactly what type of home to look for.<\/span><\/p>\n <\/b><\/p>\n Credit scores are two things in life, your best friend or your worst enemy.\u00a0<\/span><\/p>\n The higher your score, the better your interest rate will be. This will translate over into what your monthly payment will be. Typically, a score of 620 or more is preferred for a conventional loan.\u00a0<\/span><\/p>\n The sweet spot = over 740<\/span><\/p>\n One rule of thumb, you\u2019ll never regret working on your credit, no matter how old you are.\u00a0<\/span><\/p>\n <\/b><\/p>\n As a result of conventional loans not having a government backing like their counterparts, the FHA loan and the VA loan, the lender offering the conventional loan is sticking their neck out for you. Meaning, this type of loan is not insured and if the borrower defaults on their loan, the lender will not have any protection and will ultimately be responsible financially.\u00a0<\/span><\/p>\n This leaves the lender exposed and vulnerable, in order to soften that potential blow, the lender can choose to add PMI to your mortgage payment, in fact, if you put down less than 20%, you\u2019ll be required to pay private mortgage insurance (PMI).<\/span><\/p>\n The amount of your PMI will ultimately be decided based upon the type of conventional loan you get, your credit score and the amount of your down payment.\u00a0<\/span><\/p>\n Helpful Tip:<\/b><\/p>\n Don\u2019t want to have PMI added to your monthly payment? No problem. Buyers can oftentimes pay an upfront cost to cover the PMI or some buyers pay it by slightly increasing their interest rate.\u00a0<\/span><\/p>\n PMI is an important part of the loan process and you\u2019ll need a lender you can trust to walk you through all the options and figure out which one is best<\/span> for <\/span>you<\/span><\/i>.\u00a0<\/span><\/p>\n Don\u2019t lose hope!<\/b><\/p>\n PMI is not forever. You heard that right.\u00a0<\/span><\/p>\n And you will not need to refinance your house to make the PMI go away.\u00a0<\/span><\/p>\n Once you achieve 20% equity in your home, you can request that your PMI is removed from your payments. So make sure you are paying attention to your loan as time goes on. Once the home acquires 22% equity, your PMI will be removed automatically. But who wants to wait until 22%? Not us.\u00a0<\/span><\/p>\n Stay alert and don\u2019t be afraid to ask once you reach 20%.<\/span><\/p>\n Loophole:<\/b><\/p>\n Pay attention to the value of your home. <\/b>If you reach 20% equity in the home because of an increase in value (for whatever reason), be sure to contact your lender to get an appraisal and recalculate your PMI requirement.\u00a0<\/span><\/p>\n Here\u2019s a <\/span>great reference<\/span><\/a> for what could increase the value of your home. <\/span>Hint <\/i><\/b>It isn\u2019t just adding upgrades to your house!<\/span><\/p>\n <\/b><\/p>\n So, do conventional loans stack up against the VA loan or FHA loan?\u00a0<\/span><\/p>\n The VA loan is limited to <\/span>veterans, active-duty military members and their surviving spouses.<\/span><\/p>\n Pros to the VA loan:<\/b><\/p>\n Cons to VA loan:<\/b><\/p>\n The FHA loan has its own pros and cons as well.\u00a0<\/span><\/p>\n Pros to the FHA loan:<\/b><\/p>\n Con to the FHA:<\/b><\/p>\n To add to the complexity of mortgage loans, there are different <\/span>types<\/span><\/i> of conventional loans.<\/span><\/p>\n If a lender would like to sell a loan to a government-sponsored enterprise like, Fannie Mae or Freddie Mac, they have to meet certain requirements.\u00a0<\/span><\/p>\n Why would a lender want to sell a loan? This frees up lenders\u2019 funds which allows them to bring in more qualified buyers and put them into homes.\u00a0<\/span><\/p>\n Simply put, nonconforming is the opposite of conforming loans. These do not meet Fannie Mae\u2019s or Freddie Mac\u2019s guidelines.\u00a0<\/span><\/p>\n Jumbo loans are an example of this. These loans exceed conforming loan limits, which is typically $548,250 in most counties across the country.<\/span><\/p>\n Like we mentioned earlier in this post, there are fixed-rate loans and are typically 30-year mortgages, due to the more affordable monthly payment. This interest will stay the same for as long as you have the mortgage.\u00a0<\/span><\/p>\n An <\/span>adjustable-rate mortgage<\/span><\/a>, also known as ARM, are rates that will fluctuate over time. After an initial fixed-rate period ranging from three-10 years, the ARM rates usually adjust annually.\u00a0<\/span><\/p>\n There are opportunities to pay a lower down payment but the lower you go, the more risky it is and will ultimately take you longer to build equity in your home vs someone who makes a larger down payment, as well additional interest.\u00a0<\/span><\/p>\n You could put down as little as ZERO for your down payment, but your debt-to-income ratio plays a significant role in this as well as your credit. This is very risky, so it is not always advised.<\/span><\/p>\n Chip and Joanna Gaines aren\u2019t the only ones who can fix up a house and do it well. Oftentimes it can be hard for buyers to find the house they want in the budget they have.\u00a0<\/span><\/p>\n Luckily, there are certain loans that assist with buying a fixer-upper if the market is high or when inventory is low for good quality homes.\u00a0<\/span><\/p>\n The <\/span>CHOICERenovation loan<\/span><\/a> and<\/span> HomeStyle loan<\/span><\/a> are two great options that give the right buyers an opportunity to purchase a home, make it their own AND increase the value of the neighborhood.\u00a0\u00a0<\/span><\/p>\n If you qualify for the credit score requirement, with a downpayment of at least 3-5% and have a lower debt-to-income ratio, the conventional loan may be the best option for you.\u00a0<\/span><\/p>\n Volunteer Home Mortgage can help you decide if this is the best fit for your situation, give us a call!<\/span><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" We\u2019ve all been at the stage of our adolescence where we watched TV shows and movies and thought to ourselves, \u201cthat\u2019s the house I want one day.\u201d\u00a0 We genuinely believed that those \u201cdream\u201d houses on the screen were affordable for the average person because, well, the average person in the show lives there.\u00a0 Before we […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"1200","footnotes":""},"categories":[10],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts\/503"}],"collection":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/comments?post=503"}],"version-history":[{"count":4,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts\/503\/revisions"}],"predecessor-version":[{"id":516,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts\/503\/revisions\/516"}],"wp:attachment":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/media?parent=503"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/categories?post=503"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/tags?post=503"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2021\/02\/House.gif\")
<\/span><\/p>\n1. Down payment<\/h2>\n
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![\"\"](\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2021\/02\/Want-It-Now.gif\")
<\/b><\/p>\nInterest Rates<\/h2>\n
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Credit Score<\/h2>\n
![\"\"](\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2021\/02\/Credit-Score.gif\")
<\/span><\/p>\nPMI<\/h2>\n
![\"\"](\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2021\/02\/Minion.gif\")
<\/b><\/p>\nHow is it different?<\/h2>\n
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Different Types?<\/h2>\n
![\"\"](\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2021\/02\/Complicated.gif\")
<\/span><\/p>\nConforming Conventional loans<\/b><\/h3>\n
Nonconforming Conventional loans<\/b><\/h3>\n
Fixed-rate Conventional loans<\/b><\/h3>\n
Adjustable-rate Conventional loans<\/b><\/h3>\n
Low-down-payment Conventional loans<\/b><\/h3>\n
Conventional Renovation loans<\/b><\/h3>\n
![\"\"](\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2021\/02\/Couple.gif\")
<\/span><\/p>\nSummary<\/h3>\n