Whether you are refinancing your existing mortgage or purchasing a new home, the 2 most popular mortgages are your FHA and Conventional loans. You may get two proposals to choose from…, but which one fits your needs the most and which can you qualify for? Conventional Loans: For the most part, conventional loans are backed
For the most part, conventional loans are backed by two of the government agencies, Freddie Mac and Fannie Mae. The general rule of thumb with these loans is that your LTV (loan to value) does not exceed 80 pct and is more of a “cookie cutter” loan, meaning that credit is strong and your debt to income ratio (DTI) is below 45pct. Other factors that will be looked at will be your mortgage history, past bankruptcies, foreclosures, and length of time at your current job or current profession. If you keep your loan to value below 80pct, you also will not be subject to mortgage insurance. If you are in fact over that 80pct mark, the amount of mortgage insurance you pay will depend on the amount over the 80pct that you are along with credit score and income. Third party companies, such as Genworth, will underwrite the loan as well as your bank to see if they will issue mortgage insurance and what the amount of mortgage insurance you will be paying. There are conventional loan programs that will allow the lender to actually pay the mortgage insurance for you, but this will most likely result in you paying a higher interest rate on your mortgage.
