What to Expect with a Conventional Mortgage Loan in Florida
When you’re a first-time home buyer, the world of mortgages and financing can seem confusing to say the least. Before you even begin to search for houses, exploring basic terms and phrases is a good way to start educating yourself on the home loan process. Chances are that you will have your hopes set on a conventional loan, which is the most popular kind. To make an informed decision on whether this financing option is right for you, here is a brief overview of a conventional mortgage loan in Florida.
What is a Conventional Mortgage Loan in Florida?
A conventional mortgage loan is one that is not backed by a government agency — instead, you receive this financing from private lenders. They typically come with low interest rates and are widely available compared to other types of financing. If you have a high enough credit score or down payment, a conventional mortgage might be right for you.
What are the Requirements for a Conventional Loan?
With this conventional financing option, you don’t need to meet any special eligibility requirements. However, according to Fannie Mae and Freddie Mac (two government-sponsored mortgage companies), all conventional loan borrowers must meet certain requirements:
They must have a credit score of at least 620.
They must have a debt-to-income (DTI) ratio lower than 43%.
They must be able to pay a 3% down payment or higher.
If your credit score, DTI ratio, or down payment exceeds these standards, then you will likely benefit from lower interest rates and lower monthly payments.
Low Down Payment vs. High Down Payment
While many will suggest that you need a 20% down payment for a conventional mortgage loan in Florida, that is not the case. Fannie Mae and Freddie Mac only require a 3% down payment — but there are additional costs with a low down payment.
Private Mortgage Insurance (PMI)
If your down payment is less than 20% of the home value, your lender will charge you for private mortgage insurance each month. As a result, this extra charge increases your monthly payments. Luckily, you may be able to cancel your PMI once your home reaches 20% equity.
While there are other conventional loan options that may accept a 10% down payment without requiring PMI, such as a piggyback mortgage, these are typically more difficult to qualify for. If you have a higher credit score and DTI ratio, you may find these options worth looking into.
I’m Self-Employed: What is the Best Home Loan Option for Me?
When you’re self-employed, your income may fluctuate drastically from one month to the next. If you have been self-employed for at least five years, we may be able to use one year of tax returns (as opposed to two). Depending on your situation, a conventional mortgage loan in Florida might be the most advantageous option for you.
We Make Loans Easy For You
At Champions Mortgage, we know that you want to make the best decision possible — not only for you, but for your family. If you’ve heard the horror stories, you might think it’s impossible to afford a home in this day and age. That’s why our mission is to make the home buying process easy and pain-free. Our lenders advise you on the wisest steps to take before, during, and after getting your loan so you can eliminate roadblocks and snag the keys to your new home.
Looking for more resources? Check out our Borrower’s Guide for first-time home buyers.
Ready to start the loan application process? Begin filling out our pre-approval form here.