Conventional Loans are home loans that conform to the underwriting guidelines set by the Government Sponsored Entities, Fannie Mae and Freddie Mac. In the past, conventional loans were only for elite borrowers that had 20% or more for their down payment. Times have since changed opening up great new programs for low to middle income earners and first time homebuyers.
Why are Conventional Loans Better than FHA Loans
Conventional Loans are now an affordable option for those without the highest credit scores. Mortgage Interest Rates are currently in a tighter spread. By this I mean that the best creditor borrowers and the lower score borrowers will have an interest within 1% to 1.5% of each other.
This is helped by programs like Fannie Mae’s HomeReady Loan and Freddie Mac’s HomePossible Loan. These programs limit the loan level price adjustments (LLPAs) which increases the par offering rate. These programs also allow first time homebuyers to buy a home with only 3% down while FHA requires a minimum down payment of 3.5%.
In the past, Private Mortgage Insurance (PMI) rates would also be absurdly high for lower score borrowers seeking Conventional mortgages. With the competition between PMI companies, mortgage insurance rates have dropped significantly in the past few years. This allows Conventional loans to be very competitive with Government Insurance Loans like FHA mortgages.
Related: See our Conventional Mortgage Calculator
FHA Mortgage Insurance Cost May Cost More than Conventional Loans
Conventional loans may be a better option for homebuyers than FHA Mortgages because of the mortgage insurance savings. On Conventional loans, there is typically a monthly PMI fee if a borrower does not put a 20% down payment towards their purchase. FHA has a similar fee plus an up front charge.
Related: See our FHA Mortgage Calculator
FHA Mortgage insurance VS Private Mortgages Insurance
|FHA Mortgage Insurance||Private Mortgage Insurance|
|Required on all Loans||Required on conventional mortgages with less than 20% down|
|Two Types of mortgage insurance||May be dropped once loan to value is under 78%|
| Cannot be removed if down payment is less than 10%||What is an FHA Up Front Mortgage Insurance Premium?|
|May be more expensive||Many options for PMI payments|
|Offers Reduce Premiums for First Time Homebuyer Programs|
FHA Loans charge two types of Mortgage Insurance Premiums (MIP). There is Upfront Mortgage Insurance Premiums (UFMIP) which are payable to HUD at close. The UFMIP is calculated as a percentage of the original loan amount. This fee is currently set at 1.75% of the base loan amount. For example, If you borrower $200,000, the FHA UFMIP added to your loan amount is $3,500. This is an extra expense not found on Conventional Loans.
What is an FHA Annual Mortgage Insurance Premium?
The Second type of Mortgage Insurance on FHA Loans is Annual Mortgage Insurance Premiums (MIP). This calculation varies based on loan-to-value and loan term but is as high s .85% of the original loan amount. For example, if you borrowed $200,000 the annual MIP would be $200,000 * .0085 = $1,700 which is split up over 12 months and added to your monthly mortgage payment. In this example, your payment would increase by $141.67 for MIP.
April 2013, FHA made a major change which started the shift away from this loan type. They changed the way annual FHA mortgage insurance fees were charged by making FHA Mortgage Insurance Premiums payable for the life of the loan. In past years, it would drop off under certain circumstances similar to Conventional Loans when your loan was paid under 78% of the home’s value.
Conventional Loans are more Attractive to a Seller than FHA Financing
In many areas of the country, there is a shortage of homes for sale which creates a sellers market. This means that sellers can be more picky when accepting offers from buyers on their homes.
When a buyer is making an offer with FHA financing, a seller may be reluctant to accept due to additional requirements for the home’s conditions compared to Conventional Financing. Having a Conventional Loan Pre-Approval may make the difference from getting your offer accepted or getting rejected by a seller.
Why Would Anyone Still Do FHA Loans over Conventional Loans?
There are certain circumstances where FHA finance may be a better option than a Conventional Loan.
FHA Loans with Down Payment Assistance
Many Mortgage Down Payment Assistance Programs (DPA) work only in conjunction with FHA financing. If a borrower does not significant funds available or down payment, DPA programs may help the buy a home.
FHA Loans Allow for Lower Credit Scores
Conventional Loans have minimum credit score requirement of 620. If a borrower has a credit score lower than this, FHA financing may be the only option. Currently FHA allows for credit as low as a 530 with a 10% down payment or as low as 580 with only a 3.5% down payment. Many borrowers with a credit score lower credit scores may have no problems qualifying for FHA financing when Conventional loans are not an option.
FHA Loans Have Shorter Wait Periods Than Conventional Loans
FHA loans have shorter wait periods for major life events such as bankruptcy or foreclosure.
- FHA loans only require a 2 year wait period from Chapter 7 Bankruptcy while Conventional requires 4 years.
- FHA requires a 3 year wait period for foreclosures while Conventional Loans require 7 Years.
- These wait periods may allow a borrower to buy a home with FHA financing while conventional is not an option.
FHA Loans allow for Higher Debt To Income Ratios than Conventional Loans
A borrower may be better off with an FHA loan over conventional financing if they have a high Debt To Income Ratio.
- Conventional Loans typically require a borrower to have a Debt-to-Income (DTI) of 45% or less to qualify with a maximum DTI of 50%.
- FHA is more flexible with higher debts allowing a maximum of 56.9%. Borrowers with higher debts may only qualify for FHA Loans.
FHA Streamline Refinance
If a borrower already has an FHA Loan but does not have a significant amount of equity in their home, they may qualify for a rate reduction through an FHA Streamline Refinance. This loan type may allow them to drop their rate and payments without an appraisal or documenting income and with little to no costs. This is a program unique to FHA financing and can help a borrower that purchased their home when their credit scores were lower but have since improved.
Summary of Why Conventional Loans are Better Than FHA Loans
With the current guidelines set by FHA, Fannie Mae and Freddie Mac, Conventional Loans may be a better fit for buyers than FHA loans. Conventional loans offer lower down payments of only 3% for first time homebuyers while FHA loans require 3.5% down. Mortgage insurance may be significantly cheaper on Conventional loans versus FHA loans. Lastly, submitting an offer with Conventional Financing may be more attractive to sellers over an FHA Pre-Approval.
To get more information on what loan type maybe the best fit for your situation, call a licensed loan officer today at 800-555-2098 or request information below.
FHA Loan Limits for 2019
FHA Loan Limits Increased for 2019
On December 14, 2018, FHA increased the FHA Loan Limits for new case numbers assigned on or after January 1, 2019. The FHA loan limits have increased from 2018 FHA loan limits of $294,515 to the new floor of $314,827 for 1 UNIT properties.
Related: See our FHA Mortgage Payment Calculator
FHA’s nationwide forward mortgage limit “floor” and “ceiling” for a one-unit property in Calendar Year 2019 are $314,827 and $726,525, respectively. The loan limits in Michigan are based on the number of units of the residence.
2019 FHA Loan and Conventional Loan Limits
|MICHIGAN LOAN LIMITS||FHA||CONVENTIONAL|
Michigan FHA Loan Limits
Michigan does not have any high cost areas therefore the limits for FHA Loans and Conventional Loans are the floor limits. FHA Loan limit in Michigan is $314,827. Conventional Loan Limits in Michigan is $484,350.
Michigan VA Loan Limits
VA loans in Michigan use the Conventional Loan limits of $484,350 set for 2019. All VA loans use the same conventional loan limits which are higher than FHA loan limits.
Michigan USDA Loan Limits
USDA Loans in Michigan are set at the Conventional Loan limits of $484,350 for 2019 as well. All USDA Loans use the same conventional loan limits which are higher than FHA loan limits and allow for more purchasing power.
For More Information on FHA Loan Limits
Give us a call today at 800-555-2098 or request information below!
Select the links below for additional mortgage limits guidance for forward mortgages:
For Calendar Year 2019, the HECM maximum nationwide claim amount will be $726,525 for all areas. Refer to Mortgagee Letter 18-12 for more details.
The Federal Housing Finance Agency (FHFA) announced increased loan limits for the 2019 calendar year for Conventional Home Loans. The maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2019 will be effective for all loans sold on or after January 1st, 2019. In most of the U.S., the 2019 maximum conforming loan limit for one-unit properties will be $484,350, an increase from $453,100 in 2018.
Fannie Mae and Freddie Mac Baseline Limit Will Increase to $484,350
What is the Conventional Loan Limit on a 2 Unit Property?
The standard Conventional loan limit on a 2 Unit Property is set at $620,200. High costs areas are set at $930,300 conventional loan limit on 2 unit properties.
What is the Conventional Loan Limit on a 3 Unit Property?
The standard Conventional loan limit on a 3 Unit Property is set at $749,650. High costs areas are set at $1,124,475 conventional loan limit on 3 unit properties.
What is the Conventional Loan Limit on a 4 Unit Property?
The standard Conventional loan limit on a 4 Unit Property is set at $931,600. High costs areas are set at $1,139,400 conventional loan limit on 3 unit properties.
How is the Conventional Loan Maximum Calculated?
The Housing and Economic Recovery Act reviews the baseline conforming loan limit and requires that it be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price. When the FHFA published its Q3 2018 House Price Index (HPI) report, data showed that home prices increased by 6.9% on average. This is the amount that the baseline maximum conforming loan limit in will increase for Conventional Loans in 2019.
What is the Conventional Loan Limit for High Cost Areas?
A high cost ares is defined as a place where the local median home value exceeds the baseline confirming loan limit by 115 percent. For these areas, the “ceiling” is 150 percent of the baseline loan limit. The new ceiling loan limit for one-unit properties in most high-cost areas will be $726,525 — or 150 percent of $484,350.
The new High Cost Conventional Loan Limit is $726,525 for one unit properties.
- For more information on the Fannie Mae and Freddie Mac 2019 conventional loan limits visit: Conforming Loan Limits
- For an interactive Conforming Loan Limit Map visit: Conventional Loan Limit Map
Give us a call today at 800-555-2098 or request information below!
VA Loans are mortgages guaranteed by the US Government for military members who have served our country. With no down payment required, VA Loans are one of the best loan options.
Underwriting requirements are flexible which allows for low credit scores and short wait periods after bankruptcy and foreclosure. We currently offer Zero Down VA loans with as low as a 580 credit score.
Military Veterans, Thank You For Your Service!
VA LOAN BENEFITS
Using VA financing, you can buy a house with no money out of pocket. Using a lender with no fees and negotiating to have the seller pay 3rd party closing costs, and prepaid can truly be a no cost purchase option. Other benefits include:
- Low Rates
- No down Payment Required
- Fixed Rates
- No Lender Fee Options
- Easy Eligibility Requirements
RELATED: Use our VA Loan Calculator to estimate mortgage payments!
STEPS TO GET A VA LOAN
Once you have made the decision to use your VA Loan benefits to buy a home, you can use the steps below to buy a home!
- Call a Loan Officer to review VA Loan Requirements
- Request your Certificate of Eligibility from the VA (COE)
- Receive a VA Mortgage Pre-Approval from your Loan Officer
- Return Required Loan Documents to Complete Your Pre-Approval
- Search for a Home with a Local Realtor
- Submit Your Offer on a Home You Love
- Start the Mortgage Loan Process
- Get a Home Appraisal on The Home Through Your Lender
- Receive a Clear to Close from Underwriting
- Schedule the Loan Closing and Review Final Numbers
- Sign Loan Documents in from of a Notary
- Get the Keys to your Home!
Currently serving or a veteran? You are eligible for special mortgage benefits. Give us a call today at 800-555-2098 or request information below!
When it comes to home loans, there are hundreds of loan programs and options that you may want to consider. Many first time home buyers do not know where to start when they want to buy a home. It is overwhelming to most people who do not have experience buying a home or getting a mortgage. The good news is, a loan officer can be your tour guide to help you get the best mortgage loan.
A loan officer’s job is to review your financial situation and provide home loan options. They will help to narrow down mortgage programs that do not fit your goals and also ones that you may not be eligible for. Here are the basic categories that you should review with your loan officer to get the best mortgage for your situation.
What Mortgage Program is the Best?
There are several loan programs that you can apply for including Conventional Loans, FHA Loans, VA Loans, USDA Rural Development Loans, Jumbo loans, and Portfolio Loans. Each loan program has its pros and cons.
You may not be eligible for some programs. VA Loans, for example, require that you have served in the military. If you haven’t served, then this would not be a loan option for you. Conventional loans typically require higher credit scores and are more rate sensitive to lower credit scores. USDA RD Loans, have income limits and restricted areas where you can purchase.
As you can see it is nearly impossible to quickly learn all the ins and outs of each program when you are buying a home. A loan officer can help offer options on what loan program may be the best fit for your situation.
What Mortgage Term is the Best?
Once you decide on what mortgage program will be the best fit for your situation, you will need to decide on a mortgage term. Loan terms range anywhere from 10 years to 40 years for some programs. For most loan programs we could even offer a 17 year loan or a 27 year mortgage based on your goals. The most popular mortgage option is a 30 year mortgage.
Many financial advisers recommend a 15 year fixed rate mortgage. This allows you to get a great rate and pay off your mortgage quickly. Typically loan rates are lower for shorter term loans. The downside is that the monthly payment will be higher the shorter your loan term is.
A traditional 30 year mortgage term has low payments but most of the payment goes directly to interest for the first several years. Many people are shocked at how little their loan balance goes down after a year or two of mortgage payments.
Be sure to ask your loan officer what mortgage term is best for your goals.
Include Escrows or Waive Escrows?
When you get a mortgage you may have the option to include escrows into your mortgage payment. An escrow account is a savings account held for you by your mortgage servicer that is specifically for paying the property taxes and home owners insurance on your home.
Typically, government insured mortgages including FHA, VA and USDA require you to have an escrow account included with your mortgage.
Conventional loans may allow you to waive escrows. This means that you would be responsible to pay your own taxes and home owners insurance bills when they become due.
Many people like escrow accounts for the ease of payment. It is one less thing homeowners need to worry about when buying a home. On the other hand, some people would rather waive escrows and keep their own savings where they can earn interest and be more in control of their funds.
Fixed Rate or Adjustable Rate?
A major choice to consider when getting a mortgage is if you would rather have a fixed rate or an adjustable rate. Most homeowners choose to have a fixed rate that does not change for the life of your loan. This gives predictable payments and certainty that your payment will not adjust.
Other homeowners wish to choose an adjustable rate mortgage, commonly refereed to as an ARM Loan. Typically ARMs start off with a lower rate which is locked for a set number of years (3, 5, 7, or 10 years). Once the initial fixed period is up, the rates are subject to adjustments to the LIBOR or other indexes. If the rates go up, your mortgage payment goes up. If the rates go down, your mortgage payment goes down.
Choosing a fixed rate is thought to be a more safe and secure loan option. ARMs should be carefully considered for financially savvy homeowners. Be sure to ask your loan officer about ARM Loans if you are interested otherwise a fixed rate mortgage is most likely the best choice.
What Interest Rate Should I Pick?
Lastly, when getting a mortgage, you have to pick a mortgage rate. Many people do not realized that they have options for different mortgage rates. Once you select all of your other mortgage details, your loan officer will present your mortgage rate options.
When it comes to mortgage rates, you also need to consider the fees associated with getting the loan. Typically, the lower the rate, the higher the fee. Conversely, the higher the rate, the lower the fees.
Should I Pay Discount Points?
If you want the lowest rate possible, you can certainly request a rock bottom interest rate but be prepared to pay discount points for a rate lower than the market rates.
If you want to make sure you are having the lowest costs to get a mortgage, then you may want to consider a slightly higher interest rate. Picking a higher rate may allow you to have no lender fee or even receive a lender credit that will apply towards other closing costs and pre-paid items like taxes and insurances.
Deciding what rate and fee combination can seem difficult, but your loan officer can help you do a break even analysis to compare the time to break even on your investment of paying points for lower rates.
Lets look at an example: If you were to pay 2 points on a $100,000 loan for a lower rate, this would cost you $2,000 in extra closing costs. By getting the lower rate, lets say you save $50 per month.
To find your break even point, you will divide your extra costs of $2,000 by your savings of $50 which would give you 40 months, or 3.33 years to break even on your up front investment.
If you plan on staying in the house for 5 years, then you will save more than your costs therefore paying points may make sense. If you plan on selling your home in 2 years, then you would not benefit from the up front investment and you would be better off taking the higher rate with lower fees.
There are many factors to consider to get the best mortgage for your situation. It is not as easy as simply picking the lowest rate. Be sure to work with a trusted loan officer that can help review all the mortgage programs to get you the best mortgage for your situation.
For more information on home loan programs or to review the best loan for you, request information below or call a loan officer at 800-555-2098.
Are you currently in, or recently completed a medical residency or fellowship? Our Doctors’ Loans exclude student loans from your debt-to-income ratio! Call us today at 800-555-2098 and let us discuss your options!
Benefits of Doctors Loans in Michigan
Doctors can now easily qualify for a mortgage without including student loans in the debt to income ratios. Let’s face it, becoming a doctor costs a lot of money. Most doctoral graduates have hundreds of thousands in student loans which may prevent them from becoming home buyers. With our Michigan Doctor Loan Program, recent graduates can stop renting and buy a home.
- Up to 97% Financing
- No Monthly PMI
- Free Appraisals for all loans that close by December 31st, 2018 (credit given up to $525)
- Student Loan Deferment up continue at lease 12+ months from closing date
For more information on our Physician’s Mortgage Loan, call us at 800-555-2098 or request information below:
Combined, the top 10 largest employers in Grand Rapids employ over 66,000 people. These companies are involved in various industries which include healthcare, grocery, shopping, consumer goods, manufacturing, technology, automotive, education, and furniture. In fact, Grand Rapids is known by many as “Furniture City” because it is home to many leading furniture manufacturing companies. These companies and many more help with Grand Rapid’s strong economy and low unemployment rates. Grand Rapids and West Michigan is a very attractive location to relocate to, especially for those interested in finding a long-term career with great pay and benefits.
Related Article: 10 Reasons to Move to Grand Rapids, MI
1. Spectrum Health
Headquarters: Grand Rapids, MI
Spectrum Health is the largest employer in Grand Rapids and also the largest in the entire West Michigan. Spectrum Health is made up of hospital, treatment facilities, clinics, and urgent care facilities that provide excellent healthcare services to the residents of West Michigan.
Headquarters: Walker, MI
Meijer is a large supermarket and hypermarket which offers many products and services that allowing customers to satisfy majority of their shopping needs at one location. Now a large regional supermarket, Meijer’s headquarters is based in Grand Rapids, MI.
3. Mercy General Health Partners
Headquarters: Muskegon, MI
Mercy General Health Partners is a healthcare provider large throughout Muskegon & Kent Counties. It is a general medical hospital working to provide valuable health care to those residing in West Michigan.
4. Amway Corporation
Headquarters: Ada, MI
Amway Corporation is a international consumer to consumer sales company selling mainly in the health, beauty and home care products. This
5. Gentex Corporation
Headquarters: Zeeland, MI
Gentex is a large manufacturing company specializing in glass products for the Automotive and Aviation markets.
Headquarters: Allegan, MI
Perrigo is a manufacturer of over-the-counter and generic prescription medication, and other healthcare products that can be found in store across the world.
7. Herman Miller
Headquarters: Zeeland, MI
Herman Miller is a manufacturer of furniture and equipment. It is one of the first companies to produce furniture with a modernist style.
Headquarters: Grand Rapids, MI
Steelcase is a large furniture manufacturer, it develops a wide range of different products and services for diverse businesses and workplaces.
9. Grand Valley State University
Headquarters: Grand Rapids/Allendale, MI
Grand Valley State University (GVSU) is a large public university with two main campuses in Allendale and Grand Rapids. The college has over 25,000 students and is consistently recognized as one of the best universities in the United States.
10. Lacks Enterprises, Inc.
Headquarters: Grand Rapids, MI
Lacks Enterprises, Inc. is a large manufacturer for the Automotive Market that specializes in plastic finish products.
Rounding Out the Top 20 Employers in Grand Rapids, MI
Other large employed in the area include, Grand Rapids Public Schools, Farmers Insurance Group, SpartanNash, Gordon Food Service, Magna International Inc, Metro Health Hospital, Ventra, Alcoa Howmet Corp., Fifth Third Bank and Priority Health.
Moving to Grand Rapids or West Michigan? Send us a Message
With the thriving economy in Grand Rapids, MI you may be looking to call this place home. Riverbank Finance specializes in relocation loans and can assist you to buy a home in Grand Rapids. For more information on a local mortgage company in Grand Rapids, MI send us a message and we would be glad to assist you!
We have some exciting news! Conventional Appraisals are now FREE for new loans submitted to us from 08/26/2018 that close by 12/31/2018!
Free Conventional Purchase Loan Appraisals
If you are buying a home, then take advantage of the our Free Appraisal program to keep up to an extra $525 in your pocket when we take care of the appraisal expense. Saving money for your down payment and closing costs can be a hurdle for some home buyers. This is just another way that Riverbank helps to make buying a home affordable for all.
Free Conventional Refinance Loan Appraisals
Many of our clients are finding now as the perfect time to refinance their mortgage. Refinancing with a conventional loan, you will be able to take advantage of our Free conventional appraisal program. Refinance benefits include:
- Drop PMI
- Lower your Interest Rate
- Refinance to a 15 Year Mortgage
- Consolidate High Interest Debt
To get started with a refinance mortgage with a free appraisal call us at 800-555-2098
Free Appraisal Eligibility & Requirements
- Conventional Loans Only
- Eligible for New Applications Submitted on or after 08/28/2018.
- Loan Must Close on or before December 31st, 2018.
- Eligible Property Types: Single Family Residences, 2 Units, 3-4 Units, Site Condos, Condos, PUDs (Manufactured Homes Not Eligible)
- 640+ Credit Scores
- Appraisal Transfers Not Eligible
- Program Not Available on Portfolio Loan Products
Not all will qualify. For more information, simply complete the form below or call a loan officer at 800-555-2098.
GENERAL DISCLAIMER: Program may not be available for all clients applying for conventional financing. Free Appraisal Promotion will be applied as a credit to the borrower’s closing costs on the final closing disclosure as a reimbursement of the appraisal fee limited to a maximum of $525. Appraisal rush fees will not be reimbursed. Loans that do not meet the requirements for this promotional program listed above will not be given this credit and must pay the cost of their own appraisal expenses as required by standard lender requirements. Loans that do not close, for any reason, including withdrawal or denial, will not be given the appraisal credit advertised. All loans must close by the December 31st, 2018 deadline to take advantage of this promotion. Loans that do not close by this date will not be given the promotional credit.