When it comes to home loans, there are numerous options out there that first-time home buyers can take advantage of. Ideally, getting a loan with a low down payment requirement would be your best bet since you don’t have to shell out a huge amount of money at first. Luckily one particular type of conventional loan offers only a 3% down payment, making it one of the most desirable options out there. This guide talks about what this loan type is and how you can apply for it.
What is A 3% Down Conventional Loan?
A 3% down conventional loan is a popular option for many first-time home buyers looking for less stringent credit and down payment requirements. The amount of money that you have to put down is usually pegged on the purchase price of the home you’re buying, which is usually one of the biggest hurdles to overcome when applying for a home loan. This loan type allows first-time home buyers to have the opportunity of becoming homeowners without having to fork out a lot of cash upfront.
This particular type of loan is typically arranged as a 30-year fixed-rate loan. This means that the interest rate you pay on the loan stays the same for 30 years and is not tied to any other changes happening in the economy at that time. This can work in your favor, as the interest rate will not fluctuate with changes in the economy.
3% Down Conventional Loan Requirements
The FHA offers loans to borrowers with moderate credit to make home buying more of a possibility. They then require borrowers to pay only a 3% down payment on their conventional loans, which is a lot smaller than the 3.5% of the value of the home that FHA usually requires. There are also requirements for monthly mortgage payments that you should be able to meet every month. These include:
- You should have a maximum debt-to-income ratio of 50%.
- The loan you are applying for should be no more than $625,000.
- You should have at least a 620 credit score
- You should have at least three trade lines with no delinquencies in the past two years.
How Can You Apply for a 3% Down Conventional Loan?
The FHA loan is just one of the many conventional home loans available in the market today. To get one, you will have to go through the steps to get a home loan, which involves the following:
- Pre-Qualification
- Pre-Approval
- Application
- Approval
This is the typical process that you have to go through. It’s important to know that pre-qualification is not the same as pre-approval. Pre-qualification simply means that a lender has taken an initial look at your credit and financial records and deemed you eligible for a loan. On the other hand, a pre-approval means that you’re very likely to get the loan because the lender already approves your credit and income.
Once you get pre-approval and pre-qualification, you’re ready to get your loan application started. The home loan application is the time when you have to set everything down on paper. You will have to go through a lot of documents during this process, so it’s best to make sure that you have them all ready when you go to apply.
We’re Here For You At Mortgage City!
The 3% down conventional loan is just one of the many conventional loans available in the market. Getting one is a great way to ease the burden of having to put down a large down payment. If you’re a first-time home buyer, this might be your best bet.
Mortgage City is a licensed mortgage originator offering home purchase loans to help you fulfill your financial loans. Whenever you’re planning on buying your first home or refinancing an old one, our team is here to help. Contact us today and let us help you find the most suitable conventional loan for your needs. We are licensed in multiple states, including Michigan, Florida, New Hampshire, Texas, California, Massachusetts, Indiana, and Ohio. Contact us at (248) 930-8709 to know more about our services!
