Conventional Home Loans In Lubbock

A conventional mortgage or loan is any mortgage not issued or guaranteed by the government. Instead, private lenders offer conventional mortgages. The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (Freddie Mac) may guarantee some conventional mortgages. 

Conventional loans can be used to purchase or refinance an existing loan. It may have either a fixed or an adjustable interest rate. The federal government does not guarantee typical mortgages and loans, so financial institutions and creditors impose stricter lending standards.

What is a Conforming Loan?

Conforming mortgages are those whose underlying terms and circumstances satisfy Freddie Mac’s and Fannie Mae’s funding standards. The Federal Housing Finance Agency establishes yearly lending limits for conventional mortgages. Any mortgage that exceeds the FHFA-established lending restrictions is labeled a “Non-Conforming Loan.”

Conforming lenders evaluate and fund the loans before selling them to investors such as Fannie Mae and Freddie Mac. Once the loans have been securitized, they are sold to investors on the open market. Conforming loans often have lower interest rates than non-conforming loans due to their liquidity and regulatory controls.

All conforming loans are conventional loans, but not all conventional loans are conforming loans. A jumbo loan is a loan that exceeds the conforming loan limit. Although jumbo loans meet the definition of a conventional loan, it is considered a non-conforming loan since it exceeds the loan limit set forth by the Federal Housing Finance Agency. 

Qualification Requirements of a Conventional Loan

Fannie Mae and Freddie Mac stipulate that all conventional loans must meet specific minimum requirements. Each lender may, however, impose its own, more stringent requirements, known in the industry as “lender overlays.” What lenders are prohibited from doing is setting criteria that would constitute mortgage discrimination.

Every borrower must meet the minimum eligibility requirement of a conventional loan.

• A credit score of 620 or above is required for conventional-conforming loans. Depending on the borrower’s credit scores, a down payment of 3 to 5 percent of the purchase price is required. Every borrower must have a stable and verifiable job history of at least two years.
• A debt-to-income ratio must not exceed 45%.
• Must provide the source of funds needed to close on the loan. 

Apply for a Conventional Loan with Capital Home Mortgage

Capital Home Mortgage is a direct mortgage lender in Lubbock that offers home loans to various consumers, including first-time homebuyers and individuals contemplating refinancing. Contact us if you have any queries about conventional mortgages, and we will be happy to help. Start by calling (806) 589-3428.