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Conventional mortgages often require less documentation than FHA loans or VA loans, which could speed up the overall processing time.
If you're in the market for a home, Clear Lending offers the Conventional Loan Program ideal for homeownership and one of the most popular types of loans. There are certain requirements to get approved for a conventional loan and distinct benefits that go with it. There are also a few drawbacks. If you need information on a conventional loan program in Houston, read on!
Eligible Properties
There are several types of properties eligible for conventional loans. Single-family homes used as the primary residence, second homes, and rental properties are eligible, including townhomes, condominiums, and manufactured homes. Ineligible properties are mobile homes, cooperatives, properties held in a community trust, and 2-to-4-unit properties with accessory units.
Underwriting Methods
The borrower's information and the property information will be run through an Automated Underwriting System (AUS), which will return an “Approve/Eligible” or “Accept/Eligible” status recommendation. However, when a transaction with a borrower without a credit score contributes less than 50% of qualifying income, the findings may be acceptable subject to certain conditions set by the lender. The AUS will also note the appraisal requirements in its findings.
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Credit Score
Conventional loan programs in Houston and anywhere else have set credit score thresholds that borrowers must meet. These can vary based on the type of loan and how much the borrower pays down. For example, a purchase of a regular home or condo requires a minimum 620 score, but a purchase of a manufactured home requires a 660.
Down Payment
Homebuyers who are financing with a conventional mortgage should try to pay down as much as possible. If they can get the home's loan-to-value (LTV) ratio under 80%, they won't need to pay for private mortgage insurance. However, the borrower may only pay 5% or even 3% down in some cases and still get approved.
Terms
Terms, which is the length of time a borrower finances a mortgage loan, vary on conventional mortgages. The borrower can choose 10, 15, 20, or 30 years as their term, with a payment due monthly. The minimum term is 120 months for Fannie Mae and 180 months for Freddie Mac. The interest rate is figured into each payment. Conventional loans offer fixed interest rates, meaning the interest rate stays the same for the life of the loan. Your interest rate will, in part, be determined by your credit score. The higher your score, the lower your interest rate.
Income Verification
Lenders will require that a borrower allows their income to be documented. For wage earners, this will include pay stubs, W-2s, and confirming with their employer thru a written verification of employment. For self-employed borrowers, income verification will require the last 2 years of income taxes, personal 1040s, business 1065, 1120, or 1120s in the event business income is reported separately. Employment verification will require third-party verification from a CPA, from a licensed Tax Preparer or bookkeeper.
Maximum Financed Properties
There is a maximum of ten active mortgages from a single borrower.
Maximum Loan Amounts
Conventional loans do have maximum amounts that can be loaned on a property. These can vary based on the state the property is in. In Texas, the max loan amount as of January 1st, 2025, for a single-family residence or 1 unit house is $806,500. Then 2 units $1,032,650, 3 units $1,248,150 and 4 units $1,551,250.
Escrow Accounts
An escrow account will be established on every loan, and portions of the homebuyer's monthly payment will go into escrow to cover expenses such as taxes and insurance. That is unless the loan amount represents 80% loan to value, in which case the borrower may elect to pay taxes and insurance separately.
Conventional vs FHA Home Loans
Conventional loans and FHA home loans offer similarities and differences. There are down payments, certain credit score minimums, required of both. However, FHA loans work with borrowers with a 500-credit score and above, whereas conventional loans want scores at 620 or above. Closing costs are about the same. FHA loans are insured by the Federal Housing Administration, while conventional loans are insured by PMI.
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Consider some of the Conventional Guidelines:
Minimum Credit Score: 620 under specific circumstances.
Minimum Down Payment: 3% for Primary Homes, 10% for Secondary/Vacation Homes and 20% for Rental/Investment Homes.
Maximum Debt-To-Income Ratio: Determined by Automated Underwriting System (AUS) but never over 50%.
Third Party Maximum Contributions: On Primary and Secondary Residences - 3% contribution if loan down payment is less than 10%, 6% if loan down payment is 25% to 90%, and 9% if the down payment is over 25%.
On Investment/Rental homes maximum is 2% regardless of down payment.
Don't wait any longer, and find out how much loan you can get Pre-Approved.
Whether you are considering purchasing or refinancing an existing Conventional mortgage loan, Clear Lending can help you. Complete our secure and encrypted Pre-Approval Form online, and we will contact you right away to review the best options for you.
Not all applicants will qualify. This advertisement is not an offer for an extension of credit. Please meet with a licensed loan originator for more information as programs are available only to qualified borrowers. Programs rates, fees, terms, and programs are subject to change without notice. Not all loans, loan sizes, or products may apply. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet loan-to-value requirements, and final credit approval. Approvals are subject to underwriting guidelines and program guidelines and are subject to change without notice. Some restrictions may apply.
Thanks Joan for helping me refinance my house at such an excellent interest rate. For anyone reading this I want to let you know Joan has worked very hard even calling me 10:00 pm to push me get him documents needed for a final approval. I am very happy you Joan worked my loan and actually we will talk soon for my new coming home. Thanks again Joan.
Joan Gallardo, Elena, and the rest of the team at Clear Lending really impressed me from the beginning! They are the most honest, ethical, humble, and hardworking team I have ever come across. They are the true experts in the home mortgage/ lending industry. I met Joan after being jerked around by Quicken Loans for 2 months. Quicken tried to screw me over so bad with fees thinking I was not going to read any documents. They are pure scum! I was days away from closing when Quicken told me "Not everyone can afford a home". Then I called and spoke with Joan and within an hour, he told me that a home purchase was definitely doable. Being a first time home buyer, I was very nervous about the whole process, and more so having to go through it a second time. However, Joan worked tirelessly, like I've never seen before. He explained everything to me in detail and always answered when I called; something that is very important in my eyes. There was never any gimmicks, just truth. He was always optimistic even when I was down and feeling hopeless. The exceptional service that Joan and Clear Lending provided me was just beyond what words can explain. They definitely think of every single option before giving any glimpse of negativity. Clear Lending was able to get my debt to income approved and the bank to approve my loan; All in 1 month! One major hurdle that Joan assisted me with was with my employment. The day of my closing, I got word that I was laid off. I thought the deal was dead and I was going to lose all the money I had already put down. It was one of the worst possible things that could happen. I had given up! I had no hope! I could not close on that day, but Joan went as far as speaking with the bank, and seller's realtor to extend the contract. Once extended, I was blessed enough to find another job (same industry) the very next week and with a strong Verification of Employment, I was able to close on my home AND with a low interest rate that no one else can beat! I truly feel blessed to have worked with Joan and Clear Lending. Joan and the rest of the staff wholeheartedly care about their clients. I would not think twice about referring Joan and Clear Lending to anyone. I will forever remember the hard work and dedication Joan provided to me. With gratitude and so much appreciation, I want to thank everyone at Clear Lending. I am officially a home owner! And it's all because of your outstanding work ethic.
I don't even know where to start with just how much Joan has helped us going above and beyond of his service. I was impressed with how he handled eveything from beginning til we closed, and made sure he contacted us about every detail necessary. I could reach him even late nights and weekends where he could be spending time with family but instead, he was available to assist us. I highly recommend Joan to anyone and I promise you, you won't regret it.
