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Empowering you to step into homeownership with as little as 3% down. Uncover the ideal fit for your unique situation by understanding the nuances of Conventional Loans. Elevate your home purchase with expert guidance and tailored solutions. Start your journey to homeownership today!
How to Obtain the Best Conventional Loan Rate
When it comes to financing your home, the choices can be overwhelming. Whether it’s a single-family home, condo, townhouse, land, or multi-family dwelling, navigating different loan programs, lenders, and rates can be challenging. Explore our user-friendly loan guide, and let Edgar Monroy be your expert guide through the process, ensuring a smooth and informed journey.
Ready to buy a home and need a pre-approval for your mortgage? Dive into pre-approvals, learn more, and start the process with Edgar Monroy. Your simplified path to home ownership begins here!
1. Lower your debt-to-income ratio
This ratio refers to the total percentage of your monthly income that ends up going to debt payments you need to make. A lower debt-to-income ratio means that you don't need to spend a high amount of your monthly income on debt payments. When you lower your debt-to-income ratio as much as possible, lenders will be more confident in your ability to repay the loan, giving you a better jumbo loan mortgage rate.
2. Maintain an excellent credit rating.
A higher credit score can also give you the ability to obtain a jumbo loan at a reduced interest rate. For instance, borrowers with a credit score of 800 will typically have access to lower interest rates than borrowers with a credit score of 720. If your credit score is still relatively low, you might want to take steps to improve your credit score before applying for a jumbo loan.
3. Provide the lender with a higher down payment.
Let's say that you want to purchase a home priced at $1 million. If you make a down payment of $250,000, your interest rate would be lower when compared to a situation where you make a down payment of $100,000.
Conventional Loan Benefits
Creditworthiness: Conventional loans favor a higher credit score, making them ideal for those with a strong credit history. (Min 620 FICO)
Down Payment: While a higher down payment (typically 5%) is common, the flexibility of a low down payment (as low as 3%) makes conventional loans attractive.
Interest Rates: Enjoy competitive interest rates with a strong credit history, translating to lower long-term borrowing costs.
Private Mortgage Insurance (PMI): A down payment of 20% exempts you from PMI, offering savings compared to FHA UFMIP or VA Funding fees.
Loan Limits: Conventional loans boast higher borrowing limits, advantageous for those eyeing more expensive properties.
Flexibility: Choose from various terms and options—fixed-rate or adjustable-rate mortgages—providing flexibility tailored to your financial situation.
Investment Properties: Conventional loans shine in financing investment properties (20%) and second homes(10%), making them the go-to choice for real estate investors.
With a credit score requirement of 620 and a down payment as low as 3%, coupled with the PMI advantage, conventional loans emerge as a cost-effective and flexible financing option, saving you thousands.
PROVING INCOME:
- Jumbo loans demand varied income documentation, including W-2 statements, bank statements (particularly for the self-employed or those reliant on passive income), and proof of rental income for multi-family or investment properties.
How to Qualify for a Jumbo Loan
Securing a jumbo loan demands a keen understanding of the stringent criteria compared to standard mortgages. Given that these loans lack backing from Freddie Mac or Fannie Mae, lenders assume greater risk, especially with the heightened loan amounts.
To ensure approval for a jumbo loan, concentrate on three crucial areas:
1. INCOME REQUIREMENTS:
- Maintain a debt-to-income ratio lower than traditional mortgages, of 43%.
2. DOWN PAYMENT:
- Jumbo loans typically require a down payment of 10-20%. While approval with a down payment under 10% is feasible, it may result in higher interest rates. Strategically align your down payment to optimize your loan terms.
3. CREDIT SCORE:
- Aim for a relatively high credit score, with most successful applicants boasting scores of 740 or above. While approval is possible with a score of 660, lower scores may result in increased interest rates.