Conventional Loans in Sante Fe, New Mexico

 

New Mexico Conventional Loans

At Acceptance Capital, we specialize in many different loan types in Santa Fe and the entire state of New Mexico. One of the most common loan types in today’s housing market is a conventional loan. A conventional loan is one of the most traditional loan types provided by private lenders.

A conventional loan is a loan that is not insured by a federal enterprise such as FHA, FmHA, or VA. Conventional loans adhere to the guidelines established by the Federal National Mortgage Association, also known as Fannie Mae.

Fannie Mae is a corporation established by the federal government whose purpose is to buy and sell conventional mortgage loans. They are responsible for setting the maximum loan amounts and requirements that borrowers must meet in order to qualify.

A conventional loan is typically a 30-year fixed rate mortgage. This means that the interest rate is locked in for the entire 30-year term length regardless of market conditions during the loan term, however refinancing an existing loan could be an option. They also normally require a 20% down payment when getting started. This means that 20% is paid initially and the remaining 80% of the home value will be financed by the lender.

Conventional loans are great for those who can afford the 20% down at the beginning of the loan term and looking for a lower interest rate. Borrowers who cannot afford the initial 20% down can still finance with a non-conventional loan such as an FHA or VA loan but will have higher interest rates.

To ensure qualification for a conventional loan, a borrower will need to have a debt-to-income ratio of 28/36 and a FICO credit score of 620 or higher. However, this does not mean that a borrower will not qualify if they do not meet those metrics.

When determining your interest rate for a conventional loan there are several factors that will come into play. An interest rate will be different depending on which conventional loan program a borrower qualifies for, their FICO credit score, and the amount available for a down payment.

To see if you qualify and what your interest rate will be, please contact Acceptance Capital at 505-204-0683.
Although we are located in Santa Fe, we specialize in providing some of the most competitive conventional loan rates throughout the entire state of New Mexico.

Conventional Mortgage Insurance Options

Couple signing a contract — real estate in Santa Fe, NM
Borrower-Paid Mortgage Insurance
With borrower-paid mortgage insurance (BPMI), the borrower pays the MI premium, either monthly or as a single upfront premium. Single premiums may be financed into the loan. Borrowers can qualify for a loan with a smaller down payment, enabling them to purchase a home sooner.

Borrower Paid Monthly Premium

Full premium on a monthly basis with nothing upfront at closing. Best for situations where property is appreciating and borrower may have funds to pay down the balance of the loan under 80% in order tto be cancelled. Does not cont toward the cap on closing costs.

Single Premium or Single Financed Premium Mortgage Insurance
Borrowers can pay a one-time lump sum payment, or if they don't have sufficient funds at closing, Single Financed Premium lets them finance their MI into the loan amount. This attractive option offers a low monthly payment and reduces the amount necessary at closing. Single Financed Premium MI is best for borrowers who want to minimize their monthly payment. Non-refundable does count as a closing cost and is non-cancellable, but Refundable Mi does not count toward closing costs and is cancellable.

Split Premium
By splitting the MI cost into an upfront premium and a smaller monthly renewal, Split premium dramatically reduces a borrower's monthly MI payment, which can help qualify for a larger loan. Monthly portion can be cancellable, Upfront portion counts toward closing costs limits if not refundable.

Lender-Paid Mortgage Insurance
Lender-paid mortgage insurance (LPMI) benefits you and your homebuyers. With LPMI, you pay the MI premium on the borrower's behalf, while charging a slightly higher interest rate on the loan. LPMI benefits borrowers by eliminating MI closing costs and monthly MI premiums and also provides these additional benefits: Basically a rate increase. This cannot be cancelled or adjusted for the life of the loan without refinancing and is best in a depreciating market.

FHA Mortgage Insurance

FHA Mortgage Insurance works differently than conventional Mortgage Insurance in a couple of different ways. FHA loans are flat rated, not based on credit score, so it is better for people with scores under 700. It is also more reasonable with down payment under 5%- Conventional has a 3% option, but the Conventional MI at the 3% down is higher, so sometime FHA gives us a better total payment Mortgage insurance is mandatory on all FHA loans whether they exceed 80% of the loan to value (refinances) value or purchase price (Purchases).

The Mortgage Insurance on FHA loans is there for the entire life of the loan and must be refinanced to a conventional loan to remove or reduce the MI. The main difference is it allows for less income and lower credit scores than conventional, so if it is all you qualify for it is still the best loan available.

FHA is most useful in one other way. If your property is a manufactured home, there is very limited availability for conventional loans. We do not offer conventional loans for manufactured homes, but we do manufactured homes with FHA/VA or USDA – See manufactured housing for further details.

To speak with Drew more about the conventional loans, contact Drew at (505) 204-0683 in Sante Fe, NM today.