Mortgage Banking – Conventional Loans

Most home buyers will need bank financing. What’s involved, what options are there? Who should you approach. We want to help by outlining the most common Real Estate financing methods.

VA, FHA, USDA, Conventional Loans — what are the advantages, disadvantages, and circumstances where a given option is most appropriate? How does it all work?

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The Context

Real Estate Brokers are frequently asked by buyers (and sellers!) how Banking and Mortgages work. Not only do the particulars affect the value of property buyers can afford, Loan approval and funding at closing frequently govern purchase agreement contract timelines.

Why do we need to know this stuff? Well, interest rates reflect the market and how much loans cost. Here’s a link to a news article (out today!) that discusses how Freddie Mac mortgage rates are down for the first time this year. “Fall From Four-Month High.

Oregon Bay Properties / SOCoastHomes.com normally suggests a minimum of 45 days for the length of Escrow required when Conventional Loans are in the mix.

Getting all of the moving pieces properly configured is an administrative skill acquired through years of Banking experience. Finding a great Loan Officer can make a transaction possible that otherwise might not be feasible.

How it works.

Conventional Loans are insured by Freddie Mac and Fannie Mae. Freddie and Fannie are the quasi-governmental or “Public/Private” institutions that “underwrite” loans which in effect guarantee the bank repayment if the borrower defaults.

Something many don’t know is that Conventional loans secured by Freddie/Fannie can be obtained to finance multi-residential property: duplexes, up to four-plexes are eligible.

Credit Score:

620 is minimum. However, there are variations depending on cash down payment, property type, and occupancy.

Credit History:

7 years after a foreclosure, 4 years after a short sale.

Debt to Income Ratios:

Mortgage to Income <= 33%

Total Debt to Income <=41%.

Down Payment Minimums:

5% for Owner Occupied Single Family.

Structures:

Site/Stick-built homes

Manufactured Homes – Double Wide built after June of 1976.

Summary:

These are just some of the conditions that Conventional Loan borrowers need to meet. There are many others. An excellent employment history may be required, for instance. Ask your Banker for details.

We are citing information provided by Sheree Busby at Stearns Bank.

Click here to view the complete document: Conventional Loan PDF.

Sheree says “Generally speaking – First time buyers are better off with FHA loans.”

We’ll discuss FHA Loans next time.

SOCoastHomes.com:

If you’re contemplating Beach Town property in or around Bandon, we’d love to talk to you. Contact us anytime!

Our first installment of this series:

We’re producing a series of blog posts on Banking that will outline a range of loan products: Conventional, FHA, VA, USDA and a couple of others that provide ‘rehabilitation’ financing for distressed properties. These outlines are not Banking advice. Call your Banker for actual details.

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