Wondering about the conventional loan requirements? Do you want to look at the downsides? Let’s go over the article!
Thinking of getting a home loan or refinancing? A conventional loan is the first thing to come to your mind. From direct lenders to credit unions, almost every loan officer is aware of the loan process. Conventional loans are not for risky borrowers, but for those with a rock-solid financial profile. So, in this article, we walk you through the conventional loan requirements Texas. Let’s have a look below.
Conventional Loan is Different from a Government-backed Loan
The main difference between the two types of mortgages is that the department backs the program. The government does not guarantee home loans; therefore, lenders are likely to deep comb the applications. Government-backed programs are known to have flexible guidelines because they have the government entities backing them.
The conventional lenders do not offer the safety net in case they are unable to make loan payments on time. Lenders want to confirm that borrowers will be eventually able to repay right on time. This means you will face stricter restrictions such as high credit scores and large down payment requirements. A higher interest rate might be concerning when borrowers have low credit scores.
Downsides of a Conventional Loan
Conventional loans are the most popular mortgage product in the market, but this does not mean the program suits everyone. Conventional mortgages require a rock-solid credit report from the borrowers. Only if you have a credit score higher than 760 and saved for a 20% down payment, you are eligible for an affordable mortgage rate. A less than 20% down payment is another way to get rid of private mortgage insurance. When the credit score and down payment go down, the interest rate also increases. Remember, private mortgage insurance tends to go up with low FICO scores, too.
With flaws in your report, it is difficult to qualify for a conventional loan. In this case, you may feel that FHA loan programs have more forgiving guidelines. The conventional loan requirements are far from being lenient for borrowers with previous fiscal challenges. Conventional mortgage lenders allow buyers who have a credit score of 620, but FHA loans are available for 580 credit scores. Without a healthy financial cushion or strong credit, you might not pass the conventional loan requirements Texas.
In the end, if you have queries about conventional loan requirements, you should clear them away with a professional lender. Contact Clear Lending and seek expert assistance.
