Conventional Mortgage

A conventional mortgage, also known as a conventional loan, is a type of home loan available exclusively through private lenders such as banks, mortgage companies, or credit unions. Unlike government-backed loans, conventional mortgages are not guaranteed by federal agencies, though they may be conforming loans supported by entities like Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). These conventional loans adhere to guidelines set by these organizations.

Conventional mortgages typically offer fixed or variable interest rates. A fixed-rate mortgage maintains the same interest rate throughout the life of the loan, while a variable-rate mortgage may experience fluctuations over time. Since conventional mortgages are not federally guaranteed, they often come with stricter lending requirements determined by the lender.

Eligibility for a conventional mortgage depends on meeting specific criteria set by lenders. Since the late 2000s, these requirements have become more stringent. Lenders will primarily evaluate your assets, liabilities, and income. Generally, your monthly mortgage payments should not exceed 28% of your gross monthly income, in addition to the down payment. There may also be other up-front costs, such as underwriting fees, brokerage fees, settlement costs, or loan origination fees. Understanding these costs is crucial when considering a conventional mortgage in Florida.

To apply for a conventional mortgage, you’ll need to provide several documents and undergo a credit check. Lenders typically require:

• Proof of Income: This includes pay stubs, federal tax returns, W-2 statements, or quarterly statements from all asset accounts.
• Bank and Investment Account Statements: These documents show that you have sufficient funds for the down payment and may also be used to calculate closing costs and assess cash reserves.
• Proof of Identification: A Florida driver’s license and your Social Security number.
• Proof of Employment: Often combined with proof of income, this demonstrates a stable work history.

Without these documents, you may face challenges in applying for a conventional mortgage.

A conventional mortgage can be an excellent choice if you are looking to buy a home and meet the eligibility criteria. It is especially suited for individuals with a strong credit history and a good credit score. Ideally, you should have a high credit score, a solid record of managing debt, and a favorable debt-to-income ratio, which compares your monthly debt payments to your income.

If you qualify for conventional loans as well as other types of loans, it’s wise to compare your options. Alternatives include Federal Housing Administration (FHA) loans, U.S. Department of Agriculture (USDA) loans for rural areas, and VA loans for veterans. Our team can help you evaluate these options and determine which is best for your financial situation.

For more information about conventional mortgages or to get pre-approved, contact us today. We offer free quotes and expert guidance to help you through every step of the home-buying process. Let us assist you in achieving your homeownership goals.