Conventional or conforming loans refer to any mortgage that is not insured by the federal government. These types of mortgages follow the terms and conditions set by Fannie Mae and Freddie Mac. They are government sponsored institutions who are the largest purchasers of mortgages in the United States. These loans have stricter qualifying guidelines compared to government insured loans. High credit scores are recommended for this program since it will directly impact your monthly mortgage payment. Your debt to income ratio is also carefully reviewed and needs to be below 50%. A common misconception about conventional mortgages is that a 20% down payment is required in order to qualify. The reality is conventional financing allows for 3% down payment when used in combination with monthly mortgage insurance.

Why a Conventional Refinance Might Be Right for You

The Conventional Refinance is an excellent option when you are looking to lower your payment, change your term from an adjustable to a fixed or payoff a 2nd mortgage from your original purchase. In order to qualify for the refinance the lender will take a look at the following:

  • Your total monthly expenses 
  • Your total gross income per month 
  • Your employment history 
  • Your credit score and payment history 
  • Your assets (checking, savings, and retirement accounts) 
  • An appraisal to determine the current value of your home 

Why are Conventional Loans so Great?

The Conventional Refinance program has very competitive pricing compared to some other programs available. This can make a big difference in your monthly mortgage payment and even the interest you will pay over the life of the loan. Even though this program is more difficult to qualify for you need to consider it, especially if you have equity in your home, above average credit, or would like to avoid mortgage insurance.

What are the Advantages of Conventional Loans?

  • Competitive pricing
  • No prepayment penalty ever
  • Terms – 30yr, 25yr, 20yr, 15yr, or 10yr
  • Up to 50% debt to income ratio
  • With or without mortgage insurance 

What Are the Requirements?

  • Minimum credit score 640
  • Debt to income ratio under 50%
  • No late payments over 30 days in last 6 months 

Conventional Cashout Refinance

The Conventional Cashout is an excellent option to leverage the equity you have in your home to be able to pay off debt, do home improvement, take a vacation or simply pullout cash for anything you want. It’s one of the most effective ways to consolidate high interest debt, including credit cards under one low fixed payment per month which may be tax deductible. You can also use it to refinance out of other types of mortgages to get more favorable terms or even pay a second mortgage off. 

What Are the Advantages of A Cashout? 

  • Cash out up to $484,350K
  • Roll in all closing costs
  • Cashout up to 80% LTV
  • Debt to income ratio up to 50%
  • Consolidate debt for better terms 

What are the Requirements?

  • Primary residence only, 2nd Homes, Investment Properties
  • Minimum credit score 640
  • No late payments over 30 days in last 12 months

What are the Waiting Periods After a Hardship?

  • 4 Years from Foreclosure or Short Sale
  • 4 Years from Discharge of Chapter 7 Bankruptcy
  • 2 Years from Discharge of Chapter 13 Bankruptcy

Frequently Asked Conventional Questions:

What are the documents I will need?

  1. Copy of driver’s license 
  2. 2 W2’s or Tax returns 
  3. 2 most recent paystubs 
  4. 2 most recent asset statements 
  5. Copy of your mortgage statement 
  6. Contact information for insurance agent 

How is my interest rate determined?
The interest rate you qualify for depends on the following factors: credit scores, down payment, type of loan, mortgage insurance or no mortgage insurance and the current bond market. All these factors combined play a role in the interest rate you qualify for.

Will I be required to have an escrow account for insurance and taxes?
No, you if you would like you can pay your property taxes and insurance on your own.

What types of homes can I refinance?
Conventional loans allow you to refinance single family homes, condos, investment properties, and 2nd vacation homes.

Will I have mortgage insurance?
The short answer is it depends. There are conventional programs that can refinance with or without mortgage insurance. This includes monthly mortgage insurance, financed mortgage insurance or lender paid mortgage insurance.

How much can I cash out?
In most cases you can cashout up to 80% of the appraised value of your home. This will depend on your debt burden, credit score, and if the home is your primary or an investment property.

How long does it take to refinance?
The normal turn time for a refinance is about 3 weeks. This assumes you have all your documentation available and we schedule your appraisal upfront.

Should I make my mortgage payment during the process?
Yes, always make your mortgage payment. Your refinance is not final until the lender wires the funds to the attorney three business days after closing.