When it comes to mortgage financing, borrowers have plenty of loan choices today. Conventional loan is one of the most popular loan types out there.
Unlike VA, FHA and USDA loans, conventional loans don’t come with a government guarantee. These loans are not insured by the federal government and typically follow the guidelines of Fannie Mae or Freddie Mac. Therefore, conventional loans are not a great borrowing option for those with a low credit score or limited cash for down payment. VA, FHA and USDA mortgage loans are suitable for applicants experiencing credit score or down payment issues.
Colorado conventional loan 101
Whether you’re buying a new house or refinancing a current home, a conventional loan can benefit you in several different ways.
But, it’s important to understand that a conventional mortgage loan is of two types: a conforming or non-conforming loan.
Colorado conventional loans can be either conforming or non-conforming. Under a Colorado conforming loan, the mortgage loan should meet the criteria established by Fannie Mae or Freddie Mac. If the loan meets the requirements, it’s considered a Colorado conforming mortgage loan.
On the other hand, a Colorado non-conforming mortgage loan does not meet Fannie Mae or Freddie Mac’s requirements.
Below are the basic types of conventional loans in Colorado:
Under a fixed-rate mortgage loan agreement, the interest rate stays the same for the entire loan term. Common fixed-rate loan terms include 30 year, 20 year, 15 year and 10 year.
An adjustable-rate mortgage loan refers to when the initial interest rate is low. But, it will rise after a specified time period. Common adjustable-rate mortgage terms are 3-year, 5-year, 7-year and 10-year for the initial fixed term.
Depending on an applicant’s specific financial needs, goals and situation, they can select the right conventional loan program.
Before you apply for a Colorado conventional loan, you must meet the following requirements:
Loan applicants are generally required to have a minimum FICO score of 620. They must demonstrate a good credit history to be eligible for a Colorado conventional loan.
In general, lenders ask for a down payment of 20%. Anything less than that calls for mortgage insurance. The mortgage insurance amount is based on an applicant’s FICO score, loan amount as well as loan to value.
That being said, many lenders have been providing Colorado conventional loans for down payments as low as 3%.
If you decide to submit a lower down payment, you will need to pay the monthly mortgage insurance. Once you reach 20% equity, the insurance can be cancelled.
If you meet the basic Colorado conventional loan requirements, get in touch with us. We provide some the lowest rates and most flexible terms on Colorado Conventional Loans options.