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Conventional Home Loans

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Florida Conventional Loans are becoming more popular than government programs for borrowers with higher credit scores, strong DTI and asset scenarios due to the mortgage insurance comparisons and possible overall savings in monthly payment.

A conventional mortgage loan is considered one that “conforms” to the guidelines set forth by Fannie Mae and Freddie Mac, the two government sponsored enterprises (GSEs) that provide liquidity in the secondary mortgage market.

Technically speaking, a conventional loan in Florida is any mortgage that is not guaranteed or insured by the US Government, such as VA, FHA and USDA.


Florida Conventional Loan Basics

Florida Conventional loans are easy to define and they are loans that are not guaranteed by the federal government. Typically, these loans still follow the same guidelines as Fannie Mae and Freddie Mac.

To help understand which loans follow the same criteria, they have divided conventional loan programs into two main categories; conforming-meaning they conform to the same guidelines as Fannie Mae and Freddie Mac, whereas, non-conforming meaning they do not conform to the same guidelines.

There are no set rules that that apply to all conforming loan programs, but as a rule of thumb you should plan to have at least 5% for a down payment for a primary residence, and up to 25% Loan-to-Value (LTV) for non-owner or investment properties, depending on whether you are refinancing, doing a cash-out or debt-consolidation loan.

Another important thing to keep in mind when you are purchasing a home and you have a down payment of less than 20%, you will be required to pay Private Mortgage Insurance, also known as PMI.

PMI is an insurance that compensates lenders for the risk of lending to borrowers with small down payments. PMI does not directly benefit the borrower in this case (with exception to allowing them the option to purchase with less money as a down payment).


A few Requirements in determining qualification for Florida Conventional Loan

  • Your monthly housing costs must meet a specified percentage of your gross monthly income (28% ratio).
  • FICO credit score must be at least 620 or higher and is usually required to obtain an approval.
  • You must have enough income to pay for housing costs as well as any additional monthly debt (43% ratio).

Keep in mind that these are just a few things that lenders take into consideration when pre-approving borrowers for a conventional loan.