Your Complete Guide to the Conventional Refinance Home Loan
- SECTION 1What is a CONVENTIONAL REFINANCE Loan?
- SECTION 2Am I Eligible for a CONVENTIONAL REFINANCE Loan?
- SECTION 3CONVENTIONAL REFINANCE Loan Benefits
- SECTION 4CONVENTIONAL REFINANCE Loan Rates
- SECTION 5First-Time Homebuyers
- SECTION 6CONVENTIONAL REFINANCE CONVENTIONAL REFINANCE Loans
- SECTION 7Refinancing with a CONVENTIONAL REFINANCE Loan
- SECTION 8Contract Guidelines
- SECTION 9The CONVENTIONAL REFINANCE Loan Process
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What is a Conventional refinance Loan?
Video: The Conventional refinance Loan Process
To refinance your mortgage, you’ll need to meet your lender’s refinancing requirements, which will likely include having enough equity in your home and having a debt-to-income ratio of 43% or lower. Outside of that a conventional refinance is treated like a conventional loan.
A conventional loan is one that is through Fannie mae and Freddie Mac. Conventional home loans have been streamlined through the years to provide access to the mortgage market for all types of buyers; first time home buyers, first time move up buyers, and investors.
A conventional home loan is a large sum of money lent to a borrower by a mortgage lender. Convectional loans often have higher lending requirements but the benefits of meeting those requirements are returned with competitive rates, down payment requirements, and competitive offers on your future home. When a prospective homeowner is ready to shop around for a mortgage, they will work with their Orbit Home Loan mortgage broker. This is a financial professional who brings together borrowers and lenders. They are not lenders and, as such, do not use their own funds to advance mortgage loans. Instead, they act as intermediaries, helping consumers comparison shop, bringing them a variety of quotes from different lenders at one time.
If you're ready to start your Conventional refinance loan, check your eligibility or have specific questions on the Conventional refinance loan, talk with a Orbit United Home Loans specialist today.
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Loan Chart
How Do Conventional Refinance Loans Work?
Conventional loans work like this: Your Orbit Home Loan mortgage broker (Mortgage Banker) works on your behalf to qualify you with the most competitive lenders in the nation. Conventional mortgages are typically lent out with 15 or 30 year repayment periods; the one that’s right for you depends on your personal finances, your income, and the interest rate you can secure. Once you are qualified, completed the process and have purchased the property your lender will sell your loan to Fannie Mae and Freddie Mac or but still function as the servicer of your loan and will be responsible for collecting your payments. It is important to remember that you payments includes your promise to pay back the lender with interest so they can pay Fannie Mae or Freddie Mac.
Interest is the percentage rate you pay to the lender and then to Fannie Mae and Freddie Mac for the trouble of lending you money. This is how the Fannie Mae and Freddie Mac and makes money from having lent you such a large sum. Interest rates are either fixed or adjustable and interest rates normally adjust daily but can adjust multiple times a day. The interest rate you receive on a conventional loan will also vary based on your own personal financial profile.
Interest rates and qualifications for a mortgage can vary significantly across the wide range of home loan products available to consumers, but conventional home loan terms tend to fall into a narrower set of categories. One distinction you’ll find between two types of mortgage products is conforming vs nonconforming loans.
Conforming VS Nonconforming
In the US, there are two federally run institutions that oversee a large portion of mortgage lending: Fannie Mae and Freddie Mac. The important takeaway is that conforming loans abide by lending standards put in place by Fannie Mae and Freddie Mac. Most importantly, these limits determine the possible size of the loan; In 2022, the conforming loan limit for a single-family home Is $647,200.
Nonconforming loans, sometimes called jumbo loans or Non-QM loans exceed these borrowing amounts. Nonconforming loans can vary more in their limits, rules, and conditions. Because they present a larger risk to lenders, they tend to come with higher interest rates. Non-conforming loans are not necessarily risky by default—though the Consumer Financial Protection Bureau warns they sometimes can be—but it’s still wise to read the fine print when shopping, and be sure to shop around before committing to any lender.
Exploring the Conventional Refinance Loan
Conventional Refinance Loan
The process of refinancing your mortgage can feel overwhelming. But as long as you follow the necessary steps, refinancing your mortgage could be easier than you might think. A conventional refinance is simply a non-government backed loan used to refinance or replace an existing mortgage. Like conventional loans, a conventional refinance offers fantastic rates, lower costs, and greater flexibility than other programs. ... Refinance an adjustable-rate mortgage (ARM) into a fixed rate loan.
What are Conventional Refinance Loan Limits?
The conforming loan limit is designated by county. Most counties are assigned the baseline conforming loan limit. However, there can be variations on the conforming loan limit based on regional economic differences.
For example, in areas where 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit for that area will be set higher. HERA sets the maximum loan limit for such areas as a multiple of the area median home value. The legislation also set a ceiling on the limit of 150% of the baseline loan limit.
What is the Conventional refinance funding fee?
Do not worry. As some loan products do have an additional funding fee conventional loan do not. This is one of the many benefits of taking on a conventional loan.
Is the Conventional Refinance Loan a Good Option?
There are many reason to consider doing a conventional refinance and some options might be good for you and some may not. Here are a few benefits:
- Conventional refinance: Good for lowering your rate or loan term, canceling PMI/MIP mortgage insurance, or taking cash out
- The biggest benefit to a conventional loan is that you don’t pay mortgage insurance if you have 20% equity in the home.
- But not everyone can qualify.
- You need good credit (at least a 620 score) and a solid employment history.
- If you have at least 20 percent equity, you may be able to refinance to a conventional loan with no MIP and save big on your monthly payments.
- A lender can estimate your home’s value and whether you have enough equity to get rid of MIP.
- But even if you don’t, a refinance still might make sense, thanks to today’s rock–bottom rates. You’ll retain mortgage insurance if you have less than 20 percent equity, but your savings could still be significant.
How do I get a Conventional Refinance Loan?
Talk with a trusted lender that knows Conventional refinance loans and how to get the most from this hard-earned benefit. The process typically starts with getting preapproved, which can often be done in minutes using your phone, laptop or tablet.
Loan pre-approval is a key first step before making an offer on your dream home. Having that preapproval letter gives you a clear sense of your buying power and shows sellers and listing agents you have what it takes to get to closing.
Start my Conventional refinance loan with Orbit Home Loans -- the Nation's #1 Conventional refinance purchase lender
If I’ve previously used a Conventional refinance loan, can I use it again?
Yes, this is not a one-time option. Once you earn the Conventional refinance benefit, it's yours for life. You can reuse the Conventional refinance loan over and over again, and it's even possible to have more than one active CONVENTIONAL REFINANCE loan at the same time.
Continue to learn more about Conventional refinance loan eligibility in our next section.