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If you’re in need of a home mortgage, you may be trying to decide which particular mortgage is best for you.

One of the most popular types of home loans is a conventional mortgage. 

These types of loans are typically available through private lenders like

  • Credit unions
  • Banks
  • Mortgage companies

Essentially, a conventional mortgage means the loan isn’t secured or offered by a government entity.

It is possible, however, to have a conventional mortgage guaranteed by one of two government-sponsored enterprises, also referred to as Conforming Mortgages since they conform to the underwriting guidelines of the following two entities:

  • Fannie Mae
  • Freddie Mac 

To secure a conventional mortgage you’ll

  • Complete a mortgage application
  • Have a credit and imcome profile that is accepted by the lending institution underwiting the mortgage
  • Send in required documents

Other things will be taken into consideration, including your

  • Credit history
  • Credit score

The difference between a conventional mortgage and a government-back mortgage for buyers often comes down to the interest rate.

Higher interest rate

Typically, the interest rate tends to be higher with a conventional loan. 

The rate you get is often determined by

  • Length of loan
  • Size of loan
  • Current market conditions

The interest rate is also tied to a borrower’s

  • Credit
  • Personal assets
  • Size of down payment

Besides the interest rate, a conventional mortgage generally comes with stricter lending requirements.

Who qualifies for a conventional mortgage?

  • Borrowers with solid credit

Your credit score considers your credit history and any late payments you’ve ever made. The higher your credit score, the lower the interest rate you’ll likely receive. 

  • Borrowers with an acceptable debt-to-income ratio

This takes into account all your monthly debt and compares it to your monthly income. You’ll want your debt-to-income ratio to be on the lower end.

  • Borrowers with a sizeable down payment

The ability to put down a larger down payment may also help secure a conventional mortgage.

On the other hand, some borrowers have a more difficult time gaining a conventional mortgage.

  • Recent bankruptcy or foreclosure
  • Lower credit score
  • Higher debt-to-income ratio
  • Lower down payment

What are the advantages?

If you are able to qualify, a conventional mortgage does come with some advantages. 

  • More properties qualify

You can use a conventional loan for a second home, or even an investment property.

  • You can avoid certain fees

You may also be able to avoid certain fees tied to government-backed loans. While you likely WILL have to pay some fees to the lender, you may not have to pay all the fees commonly connected to other loans. 

  • More choices

Another advantage with a conventional loan is that you don’t have to stick with, say, a 30-year fixed-rate conventional mortgage.

This may be the most common, but you can also look at either a 15 or 20-year loan, along with an adjustable-rate mortgage.

The lender’s able to offer you more options, which can help in securing a loan and the property you desire.

What happens to your Application During Conventional Mortgage Underwriting?

Applying for a mortgage: What to expect in 5 Steps

The homebuying process can be stressful enough with historic low real estate inventory, but the mortgage underwriting process can sometimes be extremely frustrating, especially if you are not properly prepared with all of your financial documents organized in one place. The following steps will guide you through the mortgage process:

  1. Mortgage Application
  2. Pre-Approval
  3. Underwriting
  4. Document Request
  5. Final Review/Clear to Close

How long does underwriting take?

Loan providers have different time frames. The whole mortgage approval procedure takes about 30 – 45 working days. Turn-around time is dependent on many factors, including the time taken between submitting your mortgage application and paying your mortgage. Normally approval for a loan is granted within 24 hours from filing the complete loan application. It may even take months under extreme circumstances. However, it may only take longer when your loan documents are extremely complex.

How strict is mortgage underwriting?

In 2020, 93% of home purchases were denied in the mortgage application process. The mortgage lending community generally follows certain standards when it comes to loan origination. The conventional lenders in traditional lending follow the Fannie Mae / Freddie Mac standard, wherein the lender can sell a loan at the secondary market and use this capital to buy additional mortgages. The lending institution is able to guarantee these types of loans if the borrowers default on any loan they make.

What to expect from the underwriting process?

If you are preparing to take out a mortgage, you may have heard about underwriting. Mortgage underwriting is the process through which your lender verifies your eligibility for a home loan and the underwriter also ensures your property meets the loan’s standards. Underwriters are the final decision–makers as to whether or not your loan is approved. They follow a strict set of criteria that I’m writing the following article. (Close the article.).

How to speed up the underwriting process?

For the mortgage market, underwriters can be the guardian between you and the loan. Because mortgage approval processes are a vital step you will want a document to show your approval documents to your lenders for approval. The availability of documents quickly helps reduce underwriting delays. Even an error in signature can extend underwriting and lead to closing delays. Make sure you sign and read everything. And keep the phone line open.

How undisclosed debt on a mortgage application can cause loan denial?

Mortgage companies have several quality control documents to monitor undisclosed debt on mortgage loans. The mortgage lender might be denials or even fraud or worse. Other examples include Private Mortgage on Property. When a relative buys or pays off a mortgage, the loan balance and the monthly payment must be disclosed. The lending company will look at public records throughout the nation for property named in your name. Apply for Credit.

How long does mortgage underwriting take?

The underwriting process can take as long as several days depending on how much additional information you provide. As long as you prepare the documents quickly and respond to the request of the borrower, you can make the application process much smoother. Remember though that underwriting is only an important part of the entire lending procedure. You should have your loan fully closed within 40-50 days.

What is mortgage underwriting?

Underwriting means that an investor assesses your credit risk by evaluating your loan risk. The lender must decide if your home will be repayable by paying back the loan before it approves the mortgage, which is done by underwriting. Before applying, underwriting borrowers must collect all the required documents to be approved. An underwriting agent certify the authenticity and history of your identity.

How often does an underwriter deny a loan?

Home Mortgage Disclosure Act data show that the number of denial loans are primarily for home-equity and property improvement loans, as opposed to refinancing applications. House purchases are at the lowest denial rate compared to cars. You can view all of the data regarding consumer and mortgage loans at the consumer financial protection bureau.

What does a mortgage underwriter do?

In mortgage underwriting borrowers are asked to assess delinquency risks. The underwriter then analyzes your financial condition and documents your assessment before considering the risk level for your credit application. This is an example of a Fannie Mae Underwriting Guidelines document.

What is Underwriting?

It’s an important step for lenders to verify your assets, debts and property details in an attempt to approve your loans before making any decisions. Underwriting happens behind the scenes. Your bank may request further documents and responses including where a bank deposit came from.


About the author

I am from Chicago, IL and I have been lending in this area for 20+ years. My team and I strive to give you an enjoyable mortgage experience while providing you the best programs and rates! I am also offering a FREE mortgage analysis to determine if refinancing is right for you.

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