Conventional Loan

Traditional Mortgage Solutions for Colorado Homes

5280Lend.com works with Denver area clients to secure conventional home loans. Our expert team has the knowledge and experience to guide you through your mortgage loan process.

We understand that the mortgage loan process can be overwhelming and navigating all the information available can seem daunting. That’s why our team of professionals is here to help. We provide education, advice, and customized solutions to meet your needs.

As Colorado mortgage loan experts, we’ll thoroughly analyze your situation to determine the best type of mortgage and loan term to fit your budget and needs. We offer personalized service for homebuyers in the Denver Metro area.

Contact us to schedule a FREE mortgage assessment.

Conventional-Loans

What Is the Difference Between Conventional Loans and Government Loans?

If you’re in the market for a mortgage loan, you might be wondering what the differences are between conventional and government loans. Government-backed loans include specific types of loans like FHA, VA, and USDA loans. These loans have different requirements but also come with benefits such as lower down payments and more lenient credit score requirements.

Conventional loans are usually backed by Fannie Mae and Freddie Mac which are quasi-government agencies. Conventional loans offer a broader set of borrowing options that include financing investment properties and second home properties.

There are three main differences between conventional loans and government issued loans:

Credit Score

Conventional loans have different qualifying criteria than government loans, a main one being the credit score required to qualify. Conventional loans have a minimum credit score requirement of 620 while government loans can go as low as 580.

Mortgage Insurance

Conventional loans may require Private Mortgage Insurance (PMI) depending on the down payment amount. Depending on your down payment, FHA loans have mandatory mortgage insurance which can remain for the life of the loan. VA loans never have mortgage insurance, but VA loans are only available to active and retired military and do have VA Funding Fees.

Restrictions and paperwork

Generally speaking, it is easier and quicker to get a conventional loan than a government loan. Government loans usually have stricter guidelines and more hoops to jump through. Conventional loans typically have fewer requirements and less paperwork which can simplify the loan process. For this reason, conventional loans tend to close more quickly than government loans.

Most home loans in the United States are conventional loans. We work with homebuyers to meet the standards and requirements for all types of home mortgages. To determine if a conventional or government loan is right for you, contact 5280Lend.com and one of our loan officers can discuss which mortgage option is right for you. Contact us to schedule a FREE mortgage assessment.

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How Conventional Mortgages Work

A traditional mortgage is a debt that you take out against your property. The lender will lend you money based on the house’s value. Then, you repay the loan over time using monthly payments.

The bank determines the interest rate on a mortgage using the current market conditions and your credit history. Conventional mortgages typically carry 15-to-30-year loan repayment periods. The monthly payments are calculated based on the principal amount, interest rates, and the repayment period.

At 5280Lend.com, we work with borrowers to achieve favorable terms, including monthly mortgage payments, loan limits, closing costs, and rate options.

If you are considering buying a home, contact 5280Lend.com first. We will not only help you determine what type of loan is best for you but we also offer the option of a pre-approval and lender letter which will give you an advantage in today’s crazy market. Contact us to schedule a FREE mortgage assessment.

Advantages of Conventional Loans

Flexible Options

Unlike many government-backed loans, conventional mortgages offer more options for borrowers. Many different options exist for PMI payments if that requirement is applicable. You can finance investment properties and second homes with conventional mortgages.

Lower Down Payment Requirements

Conventional loans allow homebuyers to put less than 20% down on their homes. However, most borrowers will face a PMI requirement for a lower down payment. The advantage is achieving homeownership sooner.

Smoother Underwriting Process

Conventional loans typically require less paperwork than government-backed loans. Plus, the process moves quicker because of fewer requirements, like the FHA/VA appraisal inspection requirements.

More Accessible

Government-backed loans carry specific requirements for those who may participate. For example, VA loans apply to borrowers meeting military service requirements.

Conventional loans offer homebuyers the opportunity to finance their home with very flexible options. The experts at 5280Lend.com understand the process and requirements to make your mortgage process smoother. Contact us today!

We work with each client to determine the details of the loan program, including payment options and the term of your loan repayment. Contact us to schedule a FREE mortgage assessment.

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What Are the Requirements for A Conventional Mortgage?

There are a variety of different requirements to qualify for a conventional loan. These include:

  • Credit score: Credit scores can range from 300 to 850. To qualify for a mortgage loan you don’t have to have a perfect score of 850, but the better your credit score the better the mortgage rate you will qualify for. So, if your credit score is 760 or greater, you will generally be eligible for the best rates. Since conventional mortgage loans aren’t backed by any government agency, the standards for credit scores are set by the government-sponsored mortgage loan companies, Fannie Mae and Freddie Mac, who buy most of these loans. The rest are purchased by private lenders. Freddie Mac and Fannie Mae only require a minimum 620 credit score.

  • Debt-to-Income (DTI) ratio: The debt-to-income (DTI) ratio is a calculation used by lenders to assess your borrowing risk. It represents the percentage of your gross monthly income that goes towards paying your monthly debt payments. A low debt-to-income (DTI) ratio indicates a balanced relationship between debt and income. In other words, if your DTI ratio is 20%, then you are using 20% of your monthly gross income to pay your debts. A high DTI ratio, such as 45% may indicate that an individual’s debt exceeds their monthly income and may make it difficult to qualify for a conventional loan.

    From a lender’s perspective, borrowers with low debt-to-income ratios are a better risk because the low DTI suggests that the borrower is good at managing debt payments. DTI ratios of no more than 36% are preferred, but you can get a conventional loan with higher DTI ratios. The mortgage brokers at 5280Lend are available to help you determine your DTI ratio and what it will mean for your ability to obtain a loan.

  • Loan Limit: A loan amount lower than the conventional loan limits set annually by Fannie Mae and Freddie Mac (https://singlefamily.fanniemae.com/originating-underwriting/loan-limits).

  • Down Payment: Some borrowers may qualify for a down payment of 3%. However, the down payment requirements change depending on the situation. For example, a conventional loan for an investment property or a second home requires a higher down payment.

  • PMI – Private mortgage insurance (PMI) protects lenders if a borrower defaults on their mortgage. PMI is required when the total amount of the mortgage loan exceeds 80% of the property value. For a down payment of less than 20%, most borrowers must pay PMI.

  • Having other assets like savings accounts, retirement accounts, or other financial assets can also be factors in underwriting your loan.

We work with each client to determine the details of the loan program, including payment options and the term of your loan repayment. Contact us to schedule a FREE mortgage assessment.

Why Work with a Mortgage Bank for A Conventional Loan?

5280Lend.com is a mortgage bank. Unlike a regular bank, we do not offer checking and savings accounts. We focus solely on residential mortgage lending. By working with a mortgage bank like 5280Lend.com you can be assured of greater peace of mind during the stress of buying a home. Our team of experienced professionals will guide you through every step, helping you find the right financing option for your situation.

Whether you’re buying or refinancing, our goal is to make the entire experience easy and stress-free. Each month, we only work with a limited number of clients to ensure you receive personalized service. Also, we are a local Colorado lender, meaning we understand Colorado loan laws and requirements.

When it comes to a residential loan in any Colorado county from Denver County in the metro area to Garfield County in the west, or Weld County in the North to Costilla County in the south; you want 5280Lend.com helping you. 5280Lend.com can help you find the best rate and terms for your loan. Our team of experts takes time to understand both your short and long-term financial needs to ensure you get the best loan possible.

We have access to a variety of loan programs including fixed -rate loans, adjustable-rate mortgages (ARMs), jumbo loans, FHA and VA loans. We work with you to determine the best option for your current financial needs.

We have helped thousands of homeowners and prospective homebuyers get the financing they need in Denver and across Colorado. Contact us today to learn more about how 5280Lend.com can help you. Start with a FREE mortgage assessment.

Conventional Loan FAQs

As noted above, private mortgage insurance (PMI) protects lenders if a borrower defaults on their mortgage. PMI is required when the total amount of the mortgage loan exceeds 80% of the property value. For example, if the cost of the home is $420,000 and the appraisal value of the home is the same as the cost, then you will need to pay PMI if your loan amount exceeds $336,000. PMI is determined by the LESSER of the Sales Price and the Appraised Value.

The borrower’s credit score and the size of the loan in relation to the value of the home are the factors that determine the amount of the PMI insurance premium. Generally, it is paid as a part of your monthly mortgage payment, but there are other ways that PMI can be structured.

We work with you to find ways to avoid this requirement when possible. The good news is that PMI does not last forever and there are ways to stop paying it sooner:

  • Automatic End: PMI ends automatically when your loan is 78% of the purchase price of your home.
  • Request: You may be able to request that PMI be cancelled when your loan to value is 80% (proof of value is usually required).
  • Prepay: Prepay the principal down faster by adding an additional payments to reduce the balance to a point that the balance becomes lower than 80% of the home’s value.
  • Refinance: Refinancing after a period of time if it makes financial sense.  Interest Rates fluctuate frequently.  Part of our job is to evaluate when it is appropriate for our clients to refinance.  If we determine that a refinance is appropriate, not only can a refinance lower your monthly payment but, if your home value has increased in the meantime then your new loan may not require PMI.  5280Lend.com mortgage officers understand the importance of saving money and the many different ways we can help you do that.
  • Reappraisal: Reappraise your home.  Colorado is a very hot market.  In the last 5 years, the average price of a single family home in Colorado has gone up more than 48%!  Home Prices in Colorado Have Increased Nearly 50% in Last 5 Years (townsquarenoco.com)  This means your home equity can reach 20% much faster than just with payments alone.  Once you have owned your home for 5 years, if a new appraisal shows your loan balance is no more than 80% of the current value, you can request cancellation of PMI.

What Is a Conventional Fixed-Rate Mortgage?

A fixed-rate mortgage allows homeowners to lock in an interest rate that won’t fluctuate over time. Fixed rates provide stability for buyers who want to purchase a home without worrying about rising interest rates.

A conventional fixed-rate mortgage can be a great option for buyers who are interested in locking in a low interest rate for the long-term. With a conventional loan, you have the ability to choose between different loan terms, such as 10, 15, 20, and 30 year repayment options. The length of your loan will also impact your monthly payment amount. If you would like to examine your options further, contact 5280Lend.com and we will be happy to discuss what will work best for you.

With an adjustable rate mortgage (ARM) your payments are not fixed. Typically, an ARM has a fixed period initially and then the rate can increase or decrease based on the terms of your individual loan and a benchmark rate index. For example, common ARMs have fixed three, five, seven, or 10 year periods during which the interest rate is locked. After, the rate will be subject to fluctuation.

While for many a conventional fixed-rate mortgage is an appropriate option, for some an adjustable rate mortgage may be better. Some of the advantages of an ARM are:

  • ARMs typically have a lower initial rate than a conventional loan.  This may allow you to qualify for a larger mortgage.  Just remember that you may have to make larger monthly payments in the future and consider whether that is feasible based on your financial situation. 
  • If you already know that you will have a life change in the next few years which will require or allow you to sell the home, then an ARM may be better for you as you will be able to sell the house before the change from a fixed rate to a fluctuating rate. 

If you are wondering whether a conventional or ARM is best for your particular circumstances, contact 5280Lend.com and we will be happy to help you.

A Colorado Trusted Mortgage Bank for Conventional Loans

As a trusted Colorado mortgage lender, we are here to help you find the best home loan to fit your needs and budget. As the most common home loan type, conventional loans offer a home financing option for many homebuyers.

From first-time home buyers to vacation homes, we can walk you through the conventional loan process. We can help you with mortgage preapproval, understanding current mortgage rates, accessing the correct type of loan, and other services tied to your home financing.

5280Lend.com works with clients in the Denver area and anywhere in the State of Colorado to finance their Colorado homes. We thoroughly analyze your finances and goals to determine if a conventional loan works for you.

To start the process or learn more, fill out the contact form or call us to schedule a consultation.

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Ted was so helpful and nice during this whole process! I am a first time home buyer and he answered every single question I had while walking me through it. He was great! Highly recommend!

Sheridan Prince