First-Time Homebuyer Conventional Loan: When is it the Best Loan Option?
Published June 11, 2022
It’s important to know whether a first-time homebuyer conventional loan makes sense for you. As such, doing thorough research on home mortgage options can yield many results. Discovering that first-time homebuyer programs for conventional loans can be a relief, especially if you qualify for assistance.
First-time homebuyers often discover that they prefer the accessibility of a conventional loan. These mortgages can provide lower costs than some of their counterparts. Homebuyers who have a strong credit score that meets lender requirements often secure lower down payments.
Millennial homebuyers with lingering debts, or anyone striving for reasonable down payments, should schedule an appointment with a mortgage consultant. You can use the appointment to discuss first-time homebuyer conventional loan options. Homebuyers may also utilize the time to get ahead by filling out the loan’s pre-approval form. Learning more about how your lender can help you is the next step after doing your own research. The right lender will help you meet your long-term financial and homeowner goals.
What are the benefits of a conventional loan?
The federal government doesn’t back conventional loans. Private lenders issue conventional loans with stricter credit requirements. The greater risk to lenders means they need to determine whether you’re a reliable candidate who will repay the loan. However, you can still find big benefits in first-time homebuyer conventional loan mortgages despite the set requirements. Some of the benefits include:
Competitive interest rates: Rates can fluctuate, so make sure to regularly keep an eye on them.
Lower down payments: First-time homebuyer programs for conventional loan mortgages can offer as little as 3% down.
Ability to cancel PMI premiums: Any loan servicer will remove your private mortgage insurance after you pay down 78% of the appraised home value.
Choice of fixed or adjustable interest rates: Fixed- and adjustable-rate mortgages both have their benefits. Getting a fixed-rate mortgage can allow you to lock down potential record low rates. Securing an adjustable-rate mortgage can also make the most sense if you plan on refinancing in a couple of years.
Everyone has a unique financial situation and credit history. Mortgage consultants, like those at American Financing, can help you determine if a first-time homebuyer conventional loan makes sense for you.
Steps to get pre-approved for a mortgage as a first-time homebuyer
First-time homebuyer programs for conventional loan mortgages do not require pre-approval. However, it’s worth keeping in mind that a pre-approval letter can be an advantage in a seller’s market. The document shows sellers and lenders that you have the financial strength to back your investment. Preparing for pre-approval means that you’ll need to verify your:
Income and employment: Lenders request income documentation depending on how your work pays you. The process is easiest if you work for a single company and get a paycheck from just one source. Your lender may also ask you to provide copies of your two most-recent federal and state tax returns for a first-time homebuyer conventional loan.
Assets: Determine which accounts you’re drawing from to qualify for first-time homebuyer programs for conventional loan mortgages. Then make sure to copy statements spanning over 60 days for each of your used accounts. You should also include blank statement pages.
Debt: You’ll need to show your lender your monthly debt payments and any existing real estate debt. They’ll calculate your debt-to-income ratio once you provide information on your student, auto loans, and any credit cards.
You’re ready to take the actual pre-approval steps once you’ve organized all your documents. The steps are:
Complete a home loan application. Fill out a first-time homebuyer conventional loan form in the way that works best for you. Some lenders will give borrowers the option to complete the form in person, over the phone, or entirely online. You’ll likely need to set aside about 10 to 20 minutes to complete an online application. Make sure you have your loan information, financial information, and social security number accessible.
Document your income and all your assets. Completing this step before applying for pre-approval will save you a tremendous amount of stress. Confirm with your lender which documents they can directly request from your bank or an employer. You can also offer consent on a first-time homebuyer conventional loan pre-approval form for a lender to verify your income directly with the IRS.
Submit your pre-approval form. Your work is done once you’ve submitted your pre-approval form, documents, and any required application fees.
Common loans for a first-time homebuyer
Lenders expect you to meet a certain credit score threshold when applying for a conventional loan. A standard score is at least 620 for first-time homebuyer programs for conventional loan mortgages. This type of loan will also typically demand no more than 45% DTI. That’s why it’s important to know all your loan options. If you rule out a conventional loan option, here are some alternatives:
Jumbo loans: Like the name implies, jumbo loans require bigger sums than you’d have for first-time homebuyer conventional loan properties. The properties might range from about $650,000 to the millions. Jumbo mortgages are non-conforming due to their size, unlike some conventional loans. You’ll also likely need a credit score of 680 or higher.
FHA loans: A prospective home must meet more rigid appraisal guidelines for FHA loans. However, you don’t need as high of a credit score. First-time homebuyers who want to make low down payments with fair credit might consider this loan alternative.
Finding the right loan can feel overwhelming, even when you feel like you’ve done all the research. Speaking with an experienced mortgage consultant can help you to avoid missed opportunities.
How to customize your loan
Borrowers who get a first-time homebuyer conventional loan all have different needs. Look for a lender willing to meet your financial goals. American Financing customizes loans using the Your Term, Your Mortgage package. Select a term of 10 years or longer based on your budget to find the best loan for your first home.