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Conventional Loans

A conventional mortgage or loan is a home buyer’s loan that is not offered or secured by a government entity.

Conventional loans

A Grasp on Conventional Loans for your Home Purchase

Conventional loans

Thinking about different mortgage options that are available out there for you can be overwhelming.

It can take hundreds or even thousands of hours researching the best mortgage option so you can purchase and step into a home that is yours.

Sprint Funding is here to help you navigate through your mortgage woes with its simple and intuitive approach in moving your loans from start to finish.

Our outstanding, certified, and trusted loan officers will assist you throughout the loan process and make sure you will be making the best well-informed decision on your home investment.

Conventional loans are the most popular mortgage option amongst our customers and the most common type of loan being offered by many mortgage and loan companies like us.

Since securing the right mortgage has never been a walk in the park, what should you know about conventional loans that will help you make a well-informed decision when you plunge right into it?

Is a conventional loan right for you?

Conventional Loan Defined

About Sprint Funding

Sprint Funding provides specific scenarios where conventional loan is a best fit.

Our experienced and friendly loan specialists can talk you through the best scenarios for a conventional loan that will give you the ideal benefits if this type of loan is your ultimate choice.

A conventional loan may also be called a conventional mortgage.

It is a home loan that a home buyer can get that is not secured, insured, guaranteed, or backed by the government.

If you are a home buyer and you choose a conventional loan, you are backed by private lenders like banks, credit unions, and mortgage companies.

You can also be guaranteed by Fannie Mae and Freddie Mac, the two enterprises that are sponsored by the government to guarantee most of the mortgages made in the U.S.

It has been reported that because of the popularity of conventional loans due to their wide availability and low rates, 3 in 5 buyers use it when buying a house.

In fact, our self-employed customers benefit most from conventional loans because it requires less requirements, thus, less paperwork.

Current Conventional Loan Rates

As a trusted mortgage company, we at Spring Funding consider conventional loans a popular choice because of their low rates that make buying a home less financially stressful for our customers.

The most popular type of conventional loan, the fixed-rate conventional loan has an average rate of 3% APR (Annual Percentage Rate) for a 30-year loan.

On the other hand, the average rate for a 15-year fixed-rate conventional loan is 2.75% APR.

How are Conventional Loan Rates Determined?

As we value our customers in Sprint Funding, it is important that we let them understand how conventional loan rates are determined based on important factors that are also part of the requirements for securing a conventional loan.

These factors are:

  • Credit Score. A home buyer with a higher credit score can be offered a lower rate than a buyer with a lower credit score. For example, a buyer can be offered about 0.5% lower rate if he or she has a 740 credit score and a 20% down.
  • Mortgage Backed Securities (MBS). Mortgage lenders sell the loans they fund to investors who buy shares in pools of similar mortgages called MBS. They set their rates and monitor MBS prices all day (or pay someone to monitor for them).
  • Lenders raise conventional loan rates when MBS prices drop and drop their loan rates when MBS prices rise. The rise and fall of mortgage rates are affected by economic activity and inflation. Uncertainty in the economy is good news for you if you are looking for a mortgage since it can bring down mortgage rates.
How are Conventional Loan Rates Determined
  • Lock in conventional loan rates. Lowest conventional loan rates are available if you lock in when mortgage rates drop.
  • “Perfect” Applicant. Get a personalized rate quote. Conventional loan rates that are published are usually based on “perfect” loan applicants who have a great credit score and a large down payment.

Your personalized conventional loan rate may be lower or higher. A government study showed that loan applicants who ‘shopped around’ to get at least three quotes for their mortgage rate received up to 0.50% lower rates than those who did not.
Sprint Funding offers the best competitive rates for all budget ranges. Learn from our tenured and trusted loan advisors the best rate for your conventional loan.

Types of Conventional Loans

Sprint Funding caters to all types of conventional loans and we can guide you through the type of conventional loan transaction tailored to your needs so you can get the home that you want.

  • If your mortgage falls within the Fannie Mae and Freddie Mac’s loan down payment and income requirement, it is referred to as a conforming loan.
  • Conforming conventional loans also conform to the dollar limits set annually by the Federal Housing Finance Agency (FHFA). In 2020, a conforming conventional loan must not exceed $510,400.
  • You get to pay a lower interest rate with this type of conventional loan. The recent 15-year interest rates for conforming conventional loans are averaging under 4%.
  • You will typically be required to get mortgage insurance if your down payment is less than 20% of your conforming conventional loan. This is to protect the lender in case you stop making payments on your loan.
  • If your conventional loan exceeds the loan limit, it is considered a non-conforming conventional loan.
  • This type of loan which is also called a ‘jumbo loan’ is funded by lenders or private institutions.
  • This type of loan is usually for higher-priced homes. A disadvantage of this type of conventional loan is that they require excellent credit history, larger down payments, and higher interest rates.

  • If your conventional loan exceeds the loan limit, it is considered a non-conforming conventional loan.
  • This type of loan which is also called a ‘jumbo loan’ is funded by lenders or private institutions.
  • This type of loan is usually for higher-priced homes. A disadvantage of this type of conventional loan is that they require excellent credit history, larger down payments, and higher interest rates.

  • If your mortgage falls within the Fannie Mae and Freddie Mac’s loan down payment and income requirement, it is referred to as a conforming loan.
  • Conforming conventional loans also conform to the dollar limits set annually by the Federal Housing Finance Agency (FHFA). In 2020, a conforming conventional loan must not exceed $510,400.
  • You get to pay a lower interest rate with this type of conventional loan. The recent 15-year interest rates for conforming conventional loans are averaging under 4%.
  • You will typically be required to get mortgage insurance if your down payment is less than 20% of your conforming conventional loan. This is to protect the lender in case you stop making payments on your loan.

Conventional Loan Requirements and Qualifications

Conventional loans are generally less restrictive compared to other loan types, in some aspects.

If buying a new home is a giant step for you, mortgaging as an act of pledging your property to your creditor as a security for your debt payment, is a giant step for your creditor as well.

Since both of us will make giant steps, we provide a simplified approach to mortgaging to take off a chunk of the weight and effort from the step you need to make to close your property.

Let us guide you through these specific qualifications before you get to close a home purchase with an approved conventional mortgage or loan.

Conventional Loan Requirements 01

Good Credit Score

Conventional loans typically require a 620 or higher credit score. You will have to pay a higher interest rate with a lower credit score. A high credit score will come from a well-established credit, stellar credit reports, and a solid financial footing. A 740 credit score will give you the best terms for your conventional loan.

Conventional Loan Requirements 01

Minimum Down Payment

A 20% down payment of the home price should be readily available. Some lenders accept less than 20% but often require that you take out private mortgage insurance and pay monthly premiums until you achieve at least 20% equity of your purchased property.

Conventional Loan Requirements 01

Debt-to-Income Ratio

Your DTI is the percentage of your monthly pre-tax income that you use to pay your debts like student loans, auto loans, credit card payments, and mortgage.

The ideal debt-to-income ratio that will qualify you for a conventional loan is between 36% and 43%. The higher your DTI, the more likely that you are struggling with paying your loans.

To put it simply, you should be spending less than 36% of your monthly income on payments for debts or loans.

Conventional Loan Requirements 01

Documentation Required

Lenders want to be assured that you can afford monthly mortgage payments and handle the required down payment on the property you will buy.

Not to mention other costs like broker fees, closing costs, and underwriting fees that add up to the cost of a mortgage.

Required documentation for a conventional home loan include:

  • Proof of Income.

    Documents to support this are thirty days of pay stubs, two years of federal tax returns, asset accounts, additional income like alimony or bonuses
  • Assets.

    Your bank and investment account statements will come in handy to prove that you have funds for the down payment and closing costs for your property purchase
  • Verification of Employment.

    A stable and established work history or profits from a well- established business can guarantee you closure for your mortgage. Lenders will verify your current employment or business status to make sure you will have enough resources for monthly mortgage payments.
  • Other documentation.

    Lenders will need other personal identification cards and data so they can pull your credit report.

Conventional Loans for your Benefit

Sprint Funding highly recommends conventional loans because of its generally more lenient property standard requirements including a slightly smaller down payment compared to other mortgage types.
Our experience with homebuyers through the years has proven the other benefits of a conventional loan which include low-interest rates, fast loan processing, diverse down payment options, various term lengths on a fixed-rate mortgage, and reduced private mortgage insurance (PMI).

We understand that a mortgage loan that comes along with purchasing a new home is a great financial responsibility that you have to carry on your shoulders.

With our systematic and simplified mortgage approach at Sprint Funding, you can secure a mortgage that can save you from the pain points of the process.

We are a certified conventional mortgage broker whom you can trust to have a smooth and comfortable transaction with to begin the mortgage process for the home that will be yours.

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