Is a California Conventional Mortgage Right for You?
Buying a home is a significant investment, one that will provide a home and well-being for you and your loved ones for years to come. However, not everyone can afford to buy a home outright, especially in California, which has the most expensive home prices in the continental US.
The best alternative in those cases is to explore the different mortgage and refinance options that the market offers. One of the most traditional alternatives is to opt for a California conventional mortgage. You should learn more about this option so that you know if it is right for you.
What is a Conventional Mortgage?
Conventional mortgages are all those home purchase loans that are not offered by governmental entities, but by private entities that offer California mortgage loans. These include banks, credit unions, mortgage companies, and other lenders. The only conventional mortgages that may be guaranteed by the government are those sponsored by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Corporation (Freddie Mac). This option is ideal for investment properties, second homes, and those priced beyond the limits of government options.
These conventional loans usually have higher interest rates than options offered by federal or state agencies such as the FHA or the CalHFA. This interest rate is usually fixed, which will depend largely on the applicant’s credit history and score at the time of application. The requirements to obtain these mortgages are usually stricter than the government alternatives, and to obtain them you must submit the requirements along with the application to the lender.
How Do Conventional Mortgages Work?
Keep in mind that you will not get 100% financing for the property, so you must have a down payment of at least 20% of the total cost. The amount you get will depend on your credit history, your assets, your liabilities, and your income. Besides, the best mortgage lenders generally offer financing whose monthly payments do not exceed 28% of the household’s gross income. To do this, the applicant is financially evaluated to determine if they can afford all the first payments (down payment, insurance, paperwork) and also sustain a monthly payment for an extended period (usually 30 years).
Conventional Mortgage Requirements.
Each financial institution has its requirements for conventional mortgages. However, some elements are common in all cases:
- Proof of income: including pay stubs, tax statements, additional income, and W-2 statements.
- Assets: including bank statements for bank and investment accounts.
- Employment verification: which will provide proof that you have steady employment.
- Other documents: such as a copy of your driver’s license and social security number, among others.
How to Obtain This Credit?
To obtain mortgage financing with your mortgage loan application you must have a good credit score and an acceptable credit history. It is also essential that your debt-to-income ratio (DTI) be close to 36%, and not exceed 43%. Also, the amount of down payment you offer should be 20% or higher.
Trust the Experts
If you want to buy a home through a top California conventional mortgage, you’re in the right place. Dimitrije Isakovic Mortgage Group is one of the leading mortgage brokers in the state, and we achieve the best California mortgage and refinance rates for our clients. Let Dijimitre’s more than 25 years of experience work to your advantage to get the house you deserve. Contact us and schedule an appointment for a personal consultation.