What Is A Conventional Loan?
A conventional loan is a broad term used to describe any loan not backed by the government through the Federal Housing Authority (FHA), or Veterans Administration (VA). These loans follow guidelines set by Fannie Mae and Freddie Mac and are backed by private lenders.
What It Can Do For You
There are many benefits and drawbacks of conventional loans versus government-backed FHA loans. Here are a few to help you compare below. Our loan experts will help you decide which one is best for your situation. But they’re generally a good fit for homebuyers with a minimum credit score of 620, who have a low debt-to-income ratio and want to avoid PMI by putting down at least 20%.
Conventional Loan Benefits
- Loan limits are higher than FHA
- More home buying options compared to FHA (only for approved homes)
- Private mortgage insurance (PMI) isn’t required for an 80% loan-to-value (LTV)
- PMI is canceled when your LTV reaches 78%
- PMI rates are also lower than FHA
- You can use the loan for properties in need of repair
- You can get adjustable or fixed-rate mortgages
Conventional vs. Conforming
The term conventional loan is used to represent any non-government-backed mortgage plans. This includes anything backed by the FHA, VA, and USDA. Conforming loans are usually determined by the loan limits in your area, as set by Fannie Mae and Freddie Mac. That term can be used to encompass conventional loans, FHA loans, and many other major loan programs.
Fees and Costs
Conventional loan fees are set by lenders, not by the government, so they will vary. But, you won’t have to worry about paying one of the biggest fees homebuyers with FHA loans usually have to worry about: mortgage insurance premiums (MIP); which lasts the life of the loan.
Requirements for a Conventional Home Loan in Oklahoma
Conventional home loan requirements for Oklahoma will differ from other states and will differ by county as well. Here are some of the conventional loan requirements for Oklahoma you need to consider:
- Your maximum loan amount can’t exceed $424,100 (2019)
- Your maximum LTV ratio is 80-97% of the appraised value or selling price (whichever is lower) of the home
- You will need a down payment between 3% and 20% (including closing costs)
- Your credit score will usually need to be 620 and above
- You must have enough income to cover monthly debts plus mortgage payments
- Other loan limits for multi-unit homes will vary by county.
We’re Here to Help
Main Number: (405) 722-5626
Here at Financial Concepts Mortgage, we believe in offering a variety of loan types to make sure you get what you need. If a conforming loan doesn’t seem right for you, we can help you find the loan options that are most beneficial for your situation. It can be difficult to understand the differences between the many home loan types; we are here to answer any question you may have. Although we primarily serve homebuyers in Oklahoma, we are also able to provide loans to anyone in Texas and Arkansas.