Conventional loans are for those with a strong credit history and lots of cash for the most part where FHA accepts blemished credit and lower fico scores.
Investor non owner occupied purchase requires 20% down with minimum 660 fico score or 25% down with minimum 620 fico score. Second Home, Vacation Home purchase require only 10% down with a minimum 680 fico score to qualify.
Ask about 5% down Conventional, NO Mortgage Insurance, Minimum 620 FicoScore (lender paid mortgage insurance).
loans are more strict on credit profiles and guidelines. You will need
20% down below a minimum 660 fico score to qualify for any conventional loan because there is no mortgage insurance required. If you have a minimum 660 fico score, you may qualify for 5% down standard conventional or a minimum 700 fico may qualify for only 3% down conventional, both with mortgage insurance. Conventional financing conforming loan limits is up to $417,000 and up to $625,500 is conforming High Balance and from $625,500 up to 2 million is Jumbo.
Conventional loans also have a longer timeframe for BK and foreclosure/short sales as well. You will have to wait 4 years after a BK to qualify for a conventional loan and 7 years after a foreclosure/short sale. There are special circumstances to shorten those timeframes. You may qualify to buy 2 years after a short sale with 20% down payment and minimum 660 fico score.
FHA on the other hand only has 2 years after a BK and 3 years after a foreclosure/short sale to qualify also with shorter timeframes with special circumstance.
*You may qualify to buy one day after short sale if you were not behind on payments and are re-locating.
The FHA CHF Access
loan program may appeal to borrowers because it only requires .5% down (half percent down), Standard FHA
is 3.5% down, both have less-stringent credit qualifications and currently allows seller concessions of 6% of the purchase price as opposed to conventional financing which caps seller contributions for closing costs at 3% of the sales price with a 5% or less down payment. FHA
CHF Access is available with a minimum 580 fico score up to $417,000 and then requires a minimum 600 fico score up to High Balance Jumbo FHA loan limits
Today's Market and Closing Costs
In the current market, end of 2012 and 2013, requesting a closing cost concession from the seller can weaken your negotiating power.
Standard Sales, REOs and Short Sale sellers are all receiving multiple offers. In this highly competitive environment, Cash is King and asking for costs in your offer usually puts a buyer at the bottom of the multiple offer stack. HUD and other sellers may offer to pay closing costs, however in this market it is all about the net proceeds to the seller. Raising an offer price to offset a concession request can backfire if an appraiser cannot appraise the property at the offered sales price.
Bottom line, it is all about flexibility and properly structuring the offer and financing. Premium financinig is an alternative way to reduce a buyers amount of cash needed to close.
First-time Home Buyers Specialist
First-time home buyers should speak with a mortgage broker 760-486-4225 before deciding on a loan because mortgage brokers carry a vast array of products, including the classic conventional loans. A bank can offer a conventional loan too, but generally a bank's product line is limited and particular only to that bank.
Whereas a mortgage broker can broker loans through a many number of banks.
Sheryl Arndt, Broker - Sr. Loan Officer 760-486-4225
The main difference between a conventional loan and other types of mortgages is the fact a conventional loan is not insured by a government entity. Private mortgage insurance companies insure the Lender against loss for loans with less than 20% down.
Types of government loans are FHA, USDA and VA loans. An FHA loan is insured by the government and a VA loan is backed by the government. USDA Rural is zero down with minimum 640 fico score for rural out of city limit home purchases. VA & CalVet loans are also no down payment and no closing costs loans for Veterans or survivor of Veterans only.
Fico scores between 500-579 may qualify for 10% down payment FHA. Down payment requirements are different as well. The minimum down payment for a standard FHA loan is 3.5% or .5% (half percent down with CHF Access OR CHDAP).
The VA loans or CalVet loans are both No down payment and no closing costs but require you to be a Veteran or of survivor benefits.
Here is an example of various down payment programs and interest rates and payments @ 400k and minimum 700 fico score. The closing costs are approximately $9,000 with all of these programs. Pay your own closing costs or ask about preminum financing which can minimize your out of pocket closing costs expenses.
*So depending on how much you want to invest into the down payment and closing costs, is going to influence which program will benefit you the best financially.
Loan 400k FHA CHF ACCESS $2,000 down 3.75% 30 yr, APR 4.42% FHA fixed rate. $2,814.08 PITI
Loan 400k FHA 3.5% down $14,000 down 3.25% 30 yr, APR 3.90% FHA fixed rate $2,648.04 PITI
Loan 400k Conv 3% down $12,000 down 4% 30 yr, APR 4.24% Conv fixed rate $2,744.71 PITI
Loan 400k Conv 5% down $20,000 down 3.75% 30 yr, APR 3.98% Conv fixed rate $2,632.18 PITI
Loan 400k Conv 20% down $80,000 down 3.75% 30 yr, APR 3.83% Conv fixed rate $2,018.64 PTITI
Amortized Conventional Loans
Home buyers can take out an amortized conventional loan from a bank, a savings and loan, a credit union or even through a mortgage broker that funds its own loans or brokers them. Two important factors are the term of the loan and the loan-to-value ratio:
- 97% LTV with a 30-year term
- 95% LTV with a 30-year term
- 90% LTV with a 30-year term
- 85% LTV with a 30-year term
- 80% LTV with a 30-year term
The LTV can be lower than 80%. It can be whatever is comfortable for a borrower. If the LTV is higher than 80%, lenders require that borrowers pay for private mortgage insurance. The term of the loan can be longer or shorter, depending on the borrower's qualifications. For example, a borrower might qualify for a 40-year term, which would lower the payments. A 20-year term loan would raise the payments. Here are a few examples of how the payments can change depending on the term of the loan.
- A $200,000 loan at 4% fixed rate payable over 20 years would result in a payment of $1,211.96 per month.
- A $200,000 loan at 4% fixed rate payable over 30 years would result in a payment of $954.83 per month.
- A $200,000 loan at 4% fixed rate payable over 40 years would result in a payment of $835.88 per month.
A fully amortized conventional loan is a mortgage in which the same principal and interest payment is paid every month, from the beginning of the loan to the end of the loan. The last payment pays off the loan in full. There is no balloon payment.
Conforming loan limits are $417,000. A minimum FICO score for a good interest rate is higher than those required for an FHA loan. Loan limits above $417,000 are considered High Balance Jumbo loans and the interest rates are slightly higher.
Adjustable Conventional Loans
An adjustable-rate conventional loan means the rate is adjustable, it can fluctuate. Some rates are fixed for a certain period of time, and then they turn into adjustable-rate loans. Here are three popular types of adjustable conventional loans:
- 1 / 1 ARM. This loan is fixed for 1 year, and then it begins to adjust for the remaining 29 years.
- 3 / 1 ARM. This loan is fixed for 3 years, and then it begins to adjust for the remaining 27 years.
- 5 / 1 ARM. This loan is fixed for 5 years, and then it begins to adjust for the remaining 25 years.
- 7 / 1 ARM. This loan is fixed for 7 years, and then it begins to adjust for the remaining 23 years.
- 10/1 ARM. This loan is fixed for 10 years, and then it begins to adjust for the remaining 20 years.
Features of an Adjustable Conventional Loan
Many borrowers shy away from an adjustable rate conventional loan and prefer to stick with a traditional amortized loan. For borrowers whose income may go up, an adjustable rate mortgage might be just the ticket to help with the early years of payments.
- The initial interest rate is lower than the rate for a fixed-rate loan.
- There is a maximum amount the loan can adjust over the life of the loan known as a cap rate.
- The interest rate is determined by adding a margin rate to the index rate.
- Adjustment periods can be monthly, every six months, or every year, among other choices.
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac, the Government Sponsored Entities that buy pooled conventional loans on the secondary market or as an Investor, both have special financing for their repossessed properties.
Currently the Freddie Mac "Homesteps" programs are not available in CA. Fannie Maes' Homepath program is available and provides financing for their repossessed properties. This program has a minimum 3% down for owner occupied purchases, no mortgage insurance and does not require an appraisal. The program also allows Investors to purchase with a minimum 15% down. The Homepath renovation program is available on selected Fannie Mae properties and allows repairs and/or remodeling to be included in the purchase loan.
Sheryl Arndt, Broker/ Sr. Loan Officer is providing conventional home loans for: Los Angeles County, Agoura Hills, Alhambra, Arcadia, Artesia, Azusa, Baldwin Park, Bell, Bell Gardens, Bellflower, Beverly Hills, Bradbury, Brentwood, Burbank, Calabasas, Carson, Cerritos, Claremont, Commerce, Compton, Covina, Cudahy, Culver City, Diamond Bar, Downey, Duarte, El Monte, El Segundo, Gardena, Glendale, Glendora, Hawaiian Gardens, Hawthorne, Hermosa Beach, Hidden Hills, Huntington Park, Industry, Inglewood, Irwindale, La Canada-Flintridge, La Habra Heights, La Mirada, La Puente, La Verne, Lakewood, Lancaster, Lawndale, Lomita, Long Beach, Los Angeles, Lynwood, Malibu, Manhattan Beach, Maywood, Monrovia, Montebello, Monterey Park, Norwalk, Palmdale, Palos Verdes Estates, Paramount, Pasadena, Pico Rivera, Pomona, Rancho Palos Verdes, Redondo Beach, Rolling Hills, Rolling Hills Estates, Rosemead, San Dimas, San Fernando, San Gabriel, San Marino, Santa Clarita, Santa Fe Springs, Santa Monica, Sierra Madre, Signal Hill, South El Monte, South Gate, South Pasadena, Temple City, Torrance, Vernon, Walnut, West Covina, West Hollywood, Westlake Village, Whittier, Madera County, Chowchilla, Madera, Marin County, Belvedere, Corte Madera, Fairfax, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, Tiburon, Mariposa County, Mendocino County, Fort Bragg, Point Arena, Ukiah, Willits, Merced County, Atwater, Dos Palos, Gustine, Livingston, Los Banos, Merced, Modoc County, Alturas, Mono County, Mammoth Lakes, Monterey County, Carmel, Del Rey Oaks, Gonzales, Greenfield, King City, Marina, Monterey, Pacific Grove, Salinas, Sand City, Seaside, Soledad, Napa County, American Canyon, Calistoga, Napa, St. Helena, Yountville, Nevada County, Grass Valley, Nevada City, Truckee, Orange County, Anaheim, Brea, Buena Park, Costa Mesa, Cypress, Dana Point, Fountain Valley, Fullerton, Garden Grove, Huntington Beach, Irvine, La Habra, La Palma, Laguna Beach, Laguna Hills, Laguna Niguel, Lake Forest, Los Alamitos, Mission Viejo, Newport Beach, Orange, Placentia, San Clemente, San Juan Capistrano, Santa Ana, Seal Beach, Stanton, Tustin , Villa Park, Westminster, Yorba Linda, Placer County, Auburn, Colfax, Lincoln, Loomis, Rocklin, Roseville, Plumas County, Portola, San Bernardino County, Adelanto, Apple Valley, Barstow, Big Bear Lake, Chino, Chino Hills, Colton, Fontana, Grand Terrace, Hesperia, Highland, Loma Linda, Montclair, Needles, Ontario, Rancho Cucamonga, Redlands, Rialto, San Bernardino, Twentynine Palms, Upland, Victorville, Yucaipa, Johnson Valley, Yucca Valley, Riverside County, Banning, Beaumont, Blythe, Calimesa, Canyon Lake, Cathedral City, Coachella, Corona, Desert Hot Springs, Hemet, Indian Wells, Indio, La Quinta, Lake Elsinore, Moreno Valley, Murrieta, Norco, Palm Desert, Palm Springs, Perris, Rancho Mirage, Riverside, San Jacinto, Temecula, Placer County, Auburn, Colfax, Lincoln, Loomis, Rocklin, Roseville, Sacramento County, Folsom, Galt, Isleton, Sacramento, San Benito County, Hollister, San Juan Bautista, San Diego County, Carlsbad, Chula Vista, Coronado, Del Mar, El Cajon, Encinitas, Escondido, Imperial Beach, La Mesa, Lemon Grove, National City, Oceanside, Poway. San Diego, San Marcos, Santee, Solana Beach, Vista, San Francisco County, San Francisco, San Joaquin County, Escalon, Lathrop, Lodi, Manteca, Ripon, Stockton, Tracy, San Luis Obispo County, Arroyo Grande, Atascadero, Grover Beach, Morro Bay, Paso Robles, Pismo Beach, San Luis Obispo, San Mateo County, Atherton, Belmont, Brisbane, Burlingame, Colma, Daly City, East Palo Alto, Foster City, Half Moon Bay, Hillsborough, Menlo Park, Millbrae, Pacifica, Portola Valley, Redwood City, San Bruno, San Carlos, San Mateo, South San Francisco, Woodside, Santa Barbara County, Buellton, Carpinteria, Guadalupe, Lompoc, Santa Barbara, Santa Maria, Solvang, Santa Clara County, Campbell, Cupertino, Gilroy, Los Altos, Los Altos Hills, Los Gatos, Milpitas, Monte Sereno, Morgan Hill, Mountain View, Palo Alto, San Jose, Santa Clara, Saratoga, Sunnyvale, Santa Cruz County, Capitola, Santa Cruz, Scotts Valley, Watsonville, Shasta County, Anderson, Redding, Shasta Lake, Sierra County, Loyalton, Siskiyou County, Dorris, Dunsmuir, Etna, Fort Jones, Montague, Mount Shasta, Tulelake, Weed, Yreka, Solano County, Benicia, Dixon, Fairfield, Rio Vista, Suisun City, Vacaville, Vallejo, Sonoma County, Cloverdale, Cotati, Healdsburg, Petaluma, Rohnert Park, Santa Rosa, Sebastopol, Sonoma, Windsor , Stanislaus County, Ceres, Hughson, Modesto, Newman, Oakdale, Patterson, Riverbank, Turlock, Waterford, Sutter County, Live Oak, Yuba City, Tehama County, Corning, Red Bluff, Tehama, Trinity County, Tulare County, Dinuba, Exeter, Farmersville, Lindsay, Porterville, Tulare County, Tulare, Visalia, Woodlake, Tuolumne County, Sonora, Ventura County, Camarillo, Fillmore, Moorpark, Ojai, Oxnard, Port Hueneme, Santa Paula, Simi Valley, Thousand Oaks, Ventura, Yolo County, Davis, West Sacramento, Winters, Woodland, Yuba County, Marysville, Wheatland, Alameda County, Alameda, Albany, Berkeley, Dublin, Emeryville, Fremont, Hayward, Livermore, Newark, Oakland, Piedmont, Pleasanton, San Leandro, Union City, Alpine County, Amador County, Amador City, Ione, Jackson, Plymouth, Sutter Creek, Butte County, Chico, Gridley, Oroville, Paradise, Calaveras County, Angels Camp, Valley Springs, Colusa County, Colusa, Williams, Contra Costa County, Antioch, Brentwood, Clayton, Concord, Danville, El Cerrito, Hercules, Lafayette, Martinez, Moraga, Orinda, Pinole, Pittsburg, Pleasant Hill, Richmond, San Pablo, San Ramon, Walnut Creek, Del Norte County, Crescent City, El Dorado County, Placerville, South Lake Tahoe, Fresno County, Clovis, Coalinga, Firebaugh, Fowler, Fresno, Huron, Kerman, Kingsburg, Mendota, Orange Cove, Parlier, Reedley, San Joaquin, Sanger, Selma, Glenn County, Orland, Willows, Humboldt County, Arcata, Blue Lake, Eureka, Ferndale, Fortuna, Rio Dell, Trinidad, Imperial County, Brawley, Calexico, Calipatria, El Centro, Holtville, Westmorland, Inyo County, Bishop, Kern County, Arvin, Bakersfield, California City, Delano, Kern County, Maricopa, McFarland, Ridgecrest, Shafter, Taft, Tehachapi, Wasco, Kings County, Avenal, Corcoran, Hanford, Lemoore, Lake County, Clearlake, Lakeport, Lassen County, Susanville,