Conventional Home Loans In Tacoma

What is a Conventional Home Loan?

A conventional home loan, also known as a conventional mortgage, is a form of mortgage that is neither federally guaranteed nor insured. Private lenders such as banks, credit unions, and mortgage companies offer these loans. Government-sponsored enterprises (GSEs) such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) can guarantee certain conventional mortgages. Conventional loans provide a variety of mortgage packages to choose from, and they might be a suitable alternative if you have decent credit and a low debt-to-income ratio.

Conventional home loans are the most prevalent type of mortgage, accounting for a substantial share of home purchases and refinances. Fixed-rate and variable-rate loans are the two most common varieties. Fixed-rate mortgages have no change, but adjustable-rate mortgages have an index rate that changes at predetermined intervals.

Conventional loans fall into two categories: conforming and non-conforming. Most conventional loans are “conforming loans,” which adhere to Fannie Mae and Freddie Mac’s lending standards. There are also conventional “non-conforming” loans that do not meet these requirements.

What are the Pros and Cons of Conventional Loans?

Conventional loans come with advantages and disadvantages. Below are some of the pros and cons of a conventional mortgage:

Pros

• More Options

Since government regulations do not bind these loans, lenders can offer various options, including fixed or variable interest rates, different repayment terms, and greater flexibility.

• Low-Interest Rates

Conventional loans frequently have lower interest rates than alternative lending options, especially for applicants with good credit.

• No Upfront Mortgage Insurance

If you have a sizable down payment, you can avoid paying upfront mortgage insurance, usually needed for government-backed loans such as FHA loans.

• Higher Loan Limits

The 2023 conforming loan limit for Tacoma, Pierce County is $977,500 for a one-unit property, $1,251,400 for a duplex, $1,512,650 for a triplex, and $1879,850 for a quadplex, respectively.

• Fast Underwriting Process

Conventional loans can be processed and approved more quickly than government-backed loans because they do not require government agency approval.

Cons

• Strict Eligibility Requirements

Typically, conventional loans have more stringent credit and down payment requirements than government-backed loans. 

• • Credit Score

Conventional conforming loans require a minimum credit score of 620 to be eligible for financing. However, some lenders require a higher score of 640 to qualify.

• • Down Payment

The down payment requirement for a conventional conforming loan is 5% of the purchase price. Borrowers with exceptional credit may get by with a 3% down payment.

• Private Mortgage Insurance

If you cannot make a considerable down payment of 20% of the home’s value, you must pay private mortgage insurance (PMI), an additional cost that protects the lender in the event of default.

Overall, the suitability of a conventional loan will depend on your financial situation, credit history, and housing requirements.

Apply for a Conventional Loan in Tacoma

There are several reasons why homebuyers in Tacoma should consider Capital Home Mortgage for their conventional conforming loan needs. First, Capital Home Mortgage offers vast options that accommodate various income levels and financial obligations, allowing homebuyers to select the program that best suits their circumstances. The company’s conventional conforming loans meet the requirements of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), ensuring their quality and stability. When they choose Capital Home Mortgage for their home loan needs, homebuyers in Tacoma can benefit from flexible loan options, stringent lending standards, and exceptional service.

Call (803) 600-0088 to speak with our Tacoma Home Loan Specialists about your conventional loan questions.