Conventional Home Loans in California

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The Benefits of a Conventional Loan

If you have a great credit score and money for a substantial down payment, then a conventional mortgage loan is perfect for you. The benefits of a conventional loan are numerous:

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The process of getting a loan is faster. You deal directly with the lender and don’t need government approvals.

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It is available for investment properties, primary and secondary homes.

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Variety of down-payment options.

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You can choose an adjustable rate mortgage (ARM) or a fixed-rate mortgage.

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Conventional home loans have a lower cost than government programs.

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You will avoid a mortgage insurance premium.

Types of Conventional Loans

A conventional loan is a mortgage that follows the lending rules set by Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) and is not backed by any government agency.

Conventional loans that follow Fannie Mae and Freddie Mac guidelines are called conforming. These type of loans have loan limits. Conventional mortgages usually have the best loan terms and the best interest rates which result in a lower monthly payment.

Conventional Home Purchase in California

Conventional Purchase

There is a variety of options to purchase a house with a conventional loan. You can avoid mortgage insurance if you put down 20%. There is also a chance to remove the insurance once you have reached an 80% LTV (Loan-to-Value). You can buy primary, secondary and investment properties with this loan.

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Conventional Refinance

You may refinance into a conventional loan from other types of loans. This way you will be able to secure better terms and rates in your current situation. To avoid mortgage insurance, you need to have 80% LTV.

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Conventional Cash-out Refinance

If you need finances to pay off a debt or cover home improvements you can refinance and use cash from your home equity. There is also a possibility to lower your monthly interest rate.

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FHA-to-Conventional Refinance

Many first-time home buyers choose FHA loan to finance their primary house. However, after you have built equity on your home transition to a conventional loan is a better option. Refinancing into a conventional loan can reduce your monthly payment by removing mortgage insurance and lowering your rate.

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Conventional Loan Properties

Conventional mortgages are suitable for you if you have the intention to buy Owner Occupied, Vacation (Second Home) or Investment home. No other mortgages accommodate investment and vacation properties. Besides, with a conventional loan you can finance the following types of properties:

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Single-family Homes

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2-, 3-, 4- unit Properties

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Condominiums

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Planned Unit Developments

Conventional Loan Requirements

There are 3 main requirements to qualify for a conventional loan:

Good Credit Score

In most cases, borrowers need a credit score of 620 to be approved.

Prove a Stable Income

As a rule, your monthly payments for the house shouldn’t exceed 28% of your income. If you have other debts and payments to make (student loans, car loans, etc.), then they together shouldn’t be more than 36% of your income.

Make a Down Payment

A lot depends on the borrower’s financial situation and credit score, nevertheless the down payment could be as low as 3 %.

How to Apply for a Conventional Loan

To apply for a conventional loan you need to find a suitable lender, collect a package of documents and submit an application. You will need to provide these documents:

2 most recent years of tax returns;
2 most recent years of W2’s forms;
2 most recent bank statements;
employment history for the past two years;
Social Security number and current address.

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