Conventional Mortgage

If you’re looking to buy a home in Florida or considering an investment property, a conventional mortgage might be the perfect solution for you. Unlike government-backed loans such as FHA, VA, or USDA, conventional mortgages are offered by private lenders and offer more flexibility for your home financing needs. Whether you’re purchasing a primary residence, a beach home, or an investment property, a conventional loan can provide you with the freedom to choose the right property.

At APR Mortgage, we simplify the mortgage process by guiding you through every step with ease. Our expert team is here to help you find the best conventional loan option to suit your goals, ensuring you make informed decisions with confidence.

Ready to get started? Apply now and let us help you secure the home of your dreams.

What is a Conventional Mortgage Loan?

A conventional mortgage loan is a type of home loan that is not backed by the federal government. Instead, it is offered by private lenders such as banks, credit unions, and mortgage companies. These loans follow guidelines set by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac, but they are not insured by a government agency.

Conventional loans are highly popular and can be used to finance a wide range of properties, including primary residences, second homes, and investment properties. They offer borrowers greater flexibility compared to government-backed loans, which often have more stringent usage restrictions. Conventional loans can be either conforming, meaning they meet the standards set by Fannie Mae and Freddie Mac, or non-conforming (jumbo loans), which exceed those limits and are designed for borrowers seeking to finance more expensive properties.

These loans typically come with competitive interest rates and various down payment options, making them an appealing choice for borrowers with strong credit and financial histories. However, since they are not insured by the government, conventional loans tend to have stricter qualification criteria and may carry higher interest rates compared to government-backed loans. Conventional loans offer flexibility, affordability, and a variety of options for both first-time buyers and seasoned investors.

Conventional Mortgage Loan Key Terms

Before diving into the details of conventional mortgage loans, it’s important to understand some key terms that will help you navigate the process with ease:

AMI (Area Median Income):
The Area Median Income refers to the midpoint of income levels in a specific geographical area. It is a key metric that lenders use to assess the eligibility of borrowers. Your income, relative to the AMI in your area, can influence your loan qualification and the amount you can borrow.

Credit Score:
A credit score is a numerical representation of your creditworthiness, based on your past ability to repay debts. Ranging from 300 to 850, a higher score indicates better credit health. Most conventional loans require a credit score of at least 620, though higher scores may offer more favorable terms.

DTI (Debt-to-Income Ratio):
Your Debt-to-Income Ratio (DTI) measures the percentage of your monthly income that goes toward paying debts like loans, credit cards, and your mortgage. Conventional lenders typically look for a DTI ratio below 43%, although some exceptions may apply based on the lender’s policies.

Fannie Mae & Freddie Mac:
These are government-sponsored enterprises (GSEs) created to provide liquidity and stability to the mortgage market. Most conventional loans are backed by Fannie Mae and Freddie Mac, ensuring that lenders have the financial security to offer competitive rates to borrowers.

Loan Limit:
A loan limit refers to the maximum loan amount allowed under conventional loan guidelines. These limits vary based on location and are set by the Federal Housing Finance Agency (FHFA). For areas with higher property values, loan limits may be adjusted to accommodate the local real estate market.

PMI (Private Mortgage Insurance):
Private Mortgage Insurance is required if your down payment is less than 20% of the home’s purchase price. PMI protects the lender in case you default on the loan. It typically costs between 0.5% and 1% of the loan amount annually, with rates depending on your credit score and the size of your down payment.

Conforming vs. Non-Conforming Loans:
A conforming loan meets the underwriting standards set by Fannie Mae or Freddie Mac, while a non-conforming loan (or jumbo loan) exceeds these limits. Non-conforming loans are often used for luxury properties or homes in high-cost areas, but they may come with higher interest rates.

Fixed vs. Adjustable Rate Mortgages (ARM):
Conventional loans come in two main types: Fixed-rate mortgages, where your interest rate stays the same for the life of the loan, and Adjustable-Rate Mortgages (ARMs), where the interest rate may fluctuate over time. ARMs can offer lower initial rates but come with the risk of future rate increases.

Florida Conventional Loan Requirements

Securing a conventional mortgage loan in Florida requires meeting a few key criteria, but it can offer flexibility and competitive terms. Here’s what you need to know:

1. Credit Score: Most lenders require a minimum 620 credit score, though higher scores (680 or 700) may be needed for better terms. At Dash Home Loans, we work with borrowers who have a credit score of 620 or above.
2. Down Payment: A standard 20% down payment is typical, but you can qualify with less:
   • 3% for first-time homebuyers
   • 5% for non-first-time buyers
   • 10% for second homes
   • 20% for investment properties
3. Down payments can also be gifted from family members.
4. Debt-to-Income (DTI) Ratio: A maximum 43% DTI ratio is generally required, though exceptions can apply.
5. Property Types: Conventional loans apply to a variety of properties, including primary residences, second homes, and investment properties.
6. Credit History: Lenders expect a clean credit history with no recent bankruptcies or foreclosures (typically a 4-year waiting period).
7. Loan Limits: Florida’s loan limits are typically $726,200, though higher limits apply in some counties.

Benefits & Disadvantages of a Conventional Loan:

Get the best benefits with APR Mortagae. You can enjoy these: 

• Higher Loan Limits: Conventional loans in Florida offer higher loan limits compared to government-backed loans, allowing you to purchase a larger home or one in a more desirable location.
• No Upfront Fees: Unlike FHA or VA loans, conventional loans don’t require an upfront funding fee, helping to reduce your closing costs.
• Flexibility in Property Types: These loans can be used for a variety of property types, including primary residences, vacation homes, and investment properties, offering more options than government-backed loans.
• Private Mortgage Insurance (PMI) Only When Necessary: If you put down less than 20%, you’ll need PMI. However, once you reach 20% equity, you can eliminate PMI, which lowers your monthly payments.
• Competitive Interest Rates: With a solid credit score and down payment, conventional loans may offer more competitive interest rates compared to government-backed loans, saving you money over the life of the loan.
• No Prepayment Penalties: You can pay off your loan early without facing penalties, giving you the flexibility to save on interest if your financial situation improves.

FHA vs. Conventional Mortgage: Which Is Better in FL?

Choosing between an FHA and a conventional mortgage in Florida depends on your financial situation. FHA loans are ideal for first-time buyers or those with lower credit scores, offering a smaller down payment (as low as 3.5%). 

However, conventional loans typically require a 20% down payment, but they offer higher loan limits, better interest rates, and more flexibility for borrowers with good credit. If you have strong financials, a conventional loan might be the better choice. Ultimately, it’s about your credit score, down payment, and long-term goals. Consult with a Mortgage Coach to find the best option.

Types of Conventional Loans:

In Florida, conventional loans come in various options to suit different financial situations. Here are some of the popular types:

• Conforming Conventional Loan: Follows the standards set by the Federal Housing Finance Agency (FHFA).
• Nonconforming Conventional Loan: Exceeds FHFA’s guidelines, such as a Florida Jumbo Loan, for higher-priced homes.
• Fixed-Rate Loan: Offers stability with a consistent interest rate throughout the loan term.
• Adjustable-Rate Loan (ARM): Starts with lower payments but adjusts over time, ideal for borrowers expecting income growth.
• Conventional Renovation Loan: For buyers purchasing homes that need repairs or improvements.
• Subprime Loan: Available for those with less-than-ideal credit scores.

Additionally, Florida offers specific programs like:

• HomeReady® and Home Possible Advantage: 3% down loans with income limits or geographic restrictions.
• First-Time Home Buyer Loan: Allows first-time buyers to put down just 3%, with loans up to $484,350.
• Florida Condo Loan: Offers as little as 3% down on condos meeting conventional criteria.

Need guidance? Contact a Mortgage Coach to explore the best option for you.

Documents Needed to Qualify for a Conventional Mortgage

• https://dashhomeloans.com/florida/home-loan/conventional-loan/#what-is-fl:~:text=than%2Dstellar%20credit.-,How%20to%20Apply%20for%20a%20Conventional%20Loan,-To%20apply%20for 
• https://bluewatermtg.com/conventional-mortgage-florida/#:~:text=borrower%E2%80%99s%20credit%20rating.-,Documents%20Needed%20to%20Qualify%20for%20a%20Conventional%20Mortgage,-In%20order%20to 
• https://dashhomeloans.com/florida/home-loan/conventional-loan/#what-is-fl:~:text=Documents%20%26%20Paperwork%20to%20Submit 

Get Started with APR Mortgage Today

Ready to explore your Florida conventional loan options? Our experienced team at APR Mortgage is here to guide you every step of the way. Contact us now to discuss your loan possibilities with one of our Mortgage Experts.