Preparing For a Down Payment: Year-End Savings Strategies
As the year comes to an end, you may be beginning to think ...
Whether you’re putting down roots, picking a vacation home, or setting up an investment property, buying a home is more than just a financial commitment. It’s a commitment to become part of a community, to build a life, and maybe even start a family, so the last thing you want is to play guessing games with your mortgage.
What are Conventional Loans?
Conventional loans are not backed by government agencies like the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA). Instead, they’re made available through government-sponsored organizations known as Fannie Mae and Freddie Mac, who establish the guidelines for conventional loans and work to ensure that they remain affordable for homebuyers and homeowners.
Conventional loans combine fixed-rates and a variety of low down payment options and assistance programs to give you more flexibility up front and more stability over the life of your loan.
No Credit Score? That’s OK!
If you’ve never had a credit score, you may still be able to qualify for a conventional loan by demonstrating your financial responsibility by other means, such as rent and utility payments.
Do I Need Mortgage Insurance?
You don’t need to take out private mortgage insurance when you make a down payment of 20 percent or more. If you do need to take out private mortgage insurance, you can eliminate those payments once your equity reaches 20 percent.
HomeReady® and Home Possible®
If you aren’t able to make a large down payment or have a low-to-moderate income level, the HomeReady® and Home Possible® programs may allow you to qualify for a conventional loan that doesn’t require mortgage insurance for the life of the loan.
Conventional Home Loan Overview
- 3 percent minimum down payment required.
- Private mortgage insurance not required when making 20 percent down payment.
- Fixed-rate monthly payments.
- Seller can contribute 3-6 percent of the sale price to cover closing costs.
- Down payment can come from gift funds provided by family members.
- Non-occupying borrowers can help qualify for the loan.
- Multiple private mortgage insurance options available: monthly, upfront, split premium, and lender-paid.
