Principle Home Mortgage seeks out the best lending banks with the best rates to offer our clients in State College, PA and the Centre County region on conventional mortgage products. The biggest difference with a conventional mortgage product is how mortgage insurance is structured. For clients who have the ability to provide a 20% down payment in a forward purchase, or have 20% equity for a refinance, a conventional mortgage does not require mortgage insurance.
With less than 20% down, clients generally expect to see that conventional mortgages have lower mortgage insurance requirements than FHA products, and no upfront mortgage insurance premium. For a home purchase, conventional mortgages do allow for seller assist, but the maximum percentage varies dependent on your down payment. Principle Home Mortgage is a great resource to discuss what mortgage product better suits your scenario, whether it’s a conventional loan, FHA, VA, or USDA.
- Seller Assist: Up to 3% with low 5% down payment; up to 6% with a 10% or more down payment
- Agency: No agency but loans are underwritten to Fannie Mae or Freddie Mac guidelines
- Max Loan-to-Value: 97%
- PMI: Varies based on several factors but typically between 0.5% and 1% of the loan value
- Max Income: No maximum income limitations
- DTI Requirement: 45% but varies by lending bank and could be higher with an automated underwriting approval. (see link below for more information on automated underwriting)
- Credit Requirement: 620 is the minimum credit score required for all FANNIE MAE or FREDDIE MAC loans.
- Down Payment Requirement: As little as 3%
- Mortgage insurance is avoidable: Unlike FHA or USDA programs, conventional mortgage loans do offer the ability to avoid mortgage insurance. For conventional loans, mortgage insurance is referred to as PMI, or private mortgage insurance. If you are able to contribute a 20% down payment, you will not be required to carry PMI. With a less than 20% down payment for a home purchase, PMI will only be charged until the loan-to-value reached 78%.
- Low down payment options: Principle Home Mortgage works with lenders who offer a 97% loan-to-value conventional loan program, or just a low 3% down payment. Remember that there is a difference between closing costs and down payment.
- Seller Assist is an option: While conventional loans are set up differently than government-backed loans, seller assist is still available. The amount allowed is based upon down payment.
- No Upfront Mortgage Insurance: FHA requires the borrower to pay UFMIP (upfront mortgage insurance premium) and VA requires a ‘funding fee’ upfront. Conventional loans, even ones requiring private mortgage insurance (PMI), do not have an upfront mortgage insurance premium that would be paid at closing.
HOW DO I APPLY?
Principle Home Mortgage will discuss the various loan programs available in State College, PA and the Centre County region that you are best suited for and work with you to decide upon your best option. To apply for a conventional loan, you will need 2 years tax returns and W2s, 2 months bank statements, 2 forms of ID, and 30 days of pay stubs. If you are self-employed, these requirements will vary slightly. To determine if a conventional mortgage is your best option, whether you are seeking a low down payment, or want to avoid paying mortgage insurance, reach out to Principle Home Mortgage at (814) 308-0959 to discuss your home financing needs.