Conventional Mortgage in FloridaConventional mortgages are flexible to meet your down payment and term needs.
About Conventional Financing
Conventional financing is a great option to use when purchasing your new home. It’s the only way you can avoid any form of mortgage insurance by putting down at least 20%. That will keep your payment to a minimum by eliminating the monthly mortgage insurance and upfront funding fee you incur when using an FHA, USDA or VA financing. However conventional is still a great option with less money down. You can buy with as little as 3% down, you will simply have a monthly private mortgage insurance (pmi) factor. Conventional financing is also available for manufactured housing with some different limitations.
Credit Score and Conventional Home Loans
Your credit score is a very important factor with conventional financing. We can go down to 600 but the impact on your interest rate can vary substantially between a 600 credit score and 760. Rate will be affected incrementally at various credit thresholds. Additionally conventional financing is the most strict in regards to seasoning for bankruptcies, currently at 4 years. A deed in lieu of foreclosure has a 2 year seasoning with 20% down and underwriting approval.
Private Mortgage Insurance
If you aren’t putting 20% down you will have private mortgage insurance which is also affected by your credit score. For private mortgage insurance rates visit Essent or MGIC. PMI can either be borrower paid or built into the interest rate. The benefit to borrower paid is can be eliminated after a minimum of 7 years and a 78% loan to value ratio. Lender paid mortgage insurance is for the life of the loan as the rate is incrementally higher. The benefit though is often times your payment is less. This can be an advantage if debt to income ratios are tight.
Investment properties require a minimum of 20% down. However your rate is improved with 25% down. Your interest rate will typically be higher in any case compared to a primary or secondary home loan as the risk is higher for the lender. Keep in mind that an appraisal for an investment property will cost a little more than typical because a valuation of potential rent is required as well. The condition of the property must still be considered functional.
You can purchase a second utilizing conventional financing with as little as 10% down in Florida. This may be reduced in the not too distant future to 5% but its currently still at 10%. It’s a great option for soon to be retirees or families who just want to come play in the sunshine state. When purchasing a second home in Florida if you live in Florida the property can’t be nearby your primary residence unless on a lake or river, somewhere desirable where second homes are common.
Seller Concessions for Closing Costs
Below is a list of the allowable seller concessions for closing costs depending on down payment and property type.
- 75% LTV and lower = 9% allowable Seller’s concession
- 75.01 – 90% LTV = 6% allowable Seller’s concession
- 90.01 LTV and higher = 3% allowable Seller’s concession
- Investment properties max is 2%, 20% down payment required
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Author: Keith Meredith