what
is a conventional loan...
A
conventional mortgage is neither guaranteed
nor insured by a government agency. Most conventional
mortgages are paid off in equal monthly payments
over 15, 25, or 30 years with a fixed interest
rate established when the mortgage was created.
It is also defined in terms of its "loan
to value" ratio or LTV. The standard for
a conventional loan is 80 percent LTV, which
means that if a house costs $100,00, the lender
will provide financing worth $80,000 (80% of
the price) and you (the borrower) will put up
$20,000 (the other 20%). Conventional loans
can cover up to 97% LTV, but your credit must
be extremely good.
Conventional
loans require a 4-year period after bankruptcy
before gaining credit, whereas FHA only requires
3 years. You should be able to verify at least
2 years steady employment in the same line
of work.
The
appraisal report is the single most important
item in a conventional loan package and it
does have an affect on your LTV. Closing costs
of your loan are extra and additional above
the $20,000.
Most
conventional loans require Private Mortgage
Insurance (PMI) when the loan-to-value is
in excess of 80% (less than 20% down). Programs
can vary as to the need for coverage and amount
of coverage required. Rates can also vary
depending upon the PMI carrier. PMI protects
the lender against a foreclosure loss. |
