What is a Conventional Mortgage?

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Conventional mortgages are the ‘traditional’ mortgage most people think of when they talk about home loans. It doesn’t have government backing like FHA and VA loans have and is the reason they generally have stricter guidelines.

Despite not having government backing, most conventional loans meet Fannie Mae and Freddie Mac standards, which give them the nickname ‘conforming’ loans because they conform to the standards provided so lenders can sell the loans to Fannie Mae and Freddie Mac. Loans they can’t sell, they must keep on their books, which lower their available funds.

What are the Conventional Loan Limits?

Unlike FHA loans that have loan limits based on the county you reside in, conventional loan limits are the same across Colorado. All conventional loan borrowers may borrow up to the 2023 limit of $726,200. Like any other loan, you must qualify for the full amount by proving you have the income to cover the payment and your other debts and good enough credit that shows that you’re financially responsible.

Are Conventional Loans Good?

Conventional loans are good because they have low interest rates and competitive fees. If you have at least 20 percent to put down on the home, you also avoid paying Private Mortgage Insurance, keeping your mortgage payment even lower.

If you plan to stay in the house for a long time, conventional loans are a good option since you don’t pay PMI for the life of the loan even if you put less than 20 percent down.

Is it Hard to Qualify for a Conventional Loan?

Conventional loans make up a large portion of the loans written today. While they have stricter qualifying requirements than government loans, thousands of borrowers qualify for them. As long as you have decent credit and 5 percent to put down on the home, you’re a good candidate.

What do you Need to Qualify for a Conventional Loan?

Like any other loan, the conventional loan application process is simple. You must prove you can afford the loan by providing the following documents:

• Paystubs
• W-2s
• Tax returns (if you’re self-employed)
• Asset statements
• Proof of liabilities
• Proof of employment

Conventional loan underwriters determine what other documents they need based on the information provided. Underwriters use the appraisal and title work to approve the property and complete the entire process in a few weeks.

Conventional loan financing in Colorado is one of the most popular and least expensive financing options. If you have good credit and have minimal debts, consider this financing option. Even with less than a 20 percent down payment, it’s a great option. You can cancel PMI once you owe less than 80 percent of your home’s value.

I’ve worked with conventional loans for many years, and have had success helping my clients secure the best loan for their situation. Let’s discuss your financial situation today to see if conventional loan financing is right for you.

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