Conventional Mortgage

What is it?

A conventional mortgage is a loan used to purchase or renovate a home, or refinance an existing property. Most conventional mortgages are called “conforming” mortgages as they usually fit the guidelines issued by Fannie Mae and/or Freddie Mac (also called Government Sponsored Agencies or GSE’s) that ultimately sell the mortgages to investors. Typically, conventional loan require PMI (Private Mortgage Insurance) when a buyer is not able to put at least 20% down. In addition, guidelines are less stringent regarding property condition, and gift funds may also be used to offset down payment.

Who can it help?

If you have a credit score of 620 or higher, and your income and assets can be verified, you may be a great candidate for a conventional mortgage. Usually, you must have enough in reserves (money in savings accounts and/or investments) to cover a down payment and closing costs. Traditionally, conventional loans have some of the lowest interest rates if your qualifications fit the guidelines.


Types of Conventional Loans

HomeStyle

What is it?

Homestyle is a long-term renovation loan that can be used to purchase, refinance, or renovate a property. This type of mortgage is backed by Fannie Mae and available to owner-occupied home owners, as well as for second homes and single-family investment properties.

For buyers unable to put 20% down, mortgage insurance premiums discontinue when the mortgage balance is 78% of the property value.

Who can it help?

If you are looking to purchase or refinance a property that needs renovation, and you have qualifications that meet conventional lending guidelines, a HomeStyle loan may be perfect for you.


HomePossible

What is it?

HomePossible is a specialized mortgage product offered by Freddie Mac created for low to moderate income families. Buyers are required to invest as little as 3% down on a home purchase. This program also allows for as little as 5% down when purchasing a 3-4 family property that you intend to occupy. In addition, gift funds are allowed to cover 3% of the down payment.

Who can it help?

One of the defining factors of HomePossible mortgages is that there are income limits when going through the qualification process. HomePossible is a great alternative to FHA, and ideal if you intend on living in a multi-family home that generates income. If you are a “Do it yourself” kind of person, and you are concerned about having enough money down to afford a new home, this program could be perfect for you and your family. 


HomeReady

What is it?

The HomeReady mortgage is a conventional mortgage product offered by Fannie Mae to help low to moderate income buyers purchase or refinance a home. The advantages of this mortgage product include lower down payment and credit requirements, as well as decreased mortgage insurance rates. Specifically, HomeReady allows for family and friends to act as a co-signer for qualification should the primary borrower(s) be unable to qualify on their own.

You do not have to be a first time home buyer to qualify for a HomeReady loan. Income from boarders and accessory units (in-law apartments) is allowed for qualification.

Who can it help?

One of the defining factors of HomeReady mortgages is that there are income limits when going through the qualification process. If you are looking to buy a home with lower income and credit qualifications, or you have a family member or friend willing to help you qualify for financing, then HomeReady could help! Also a great alternative to an FHA loan.

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NOTE: Both HomePossible and HomeReady are the best options for low down payment when purchasing an owner-occupied multi-family home.