How to Buy Real Estate with Just 3% Down! (Conventional Loans)

a conventional loan is a fantastic mortgage to look at getting into this year the reason being there are so many options available of how you can use this loan product not only do you have the most property types available but you can get into a home with as little as 3% down if you are a firsttime home buyer that is a real thing with this loan product that's lower than what an FHA loan allows you to do it is the lowest down payment option available able to people that do not have special circumstances and backgrounds I would highly encourage you to look into using this loan through your local mortgage advisors or whoever you're working with to secure a mortgage for your first second or even 20th property this year I'm Hannah eser I'm a mortgage adviser and I'm super excited to share all of my tips with you let's dive in so first what is a conventional mortgage well simply put a conventional loan is a loan that is not insured by the federal government such as FHA VA and USDA loans are a conventional loan is going to be backed by private lenders banks credit unions and mortgage companies a conventional loan also has two different types one is conforming and one is non-conforming today we're going to be really talking about more of conforming conventional loans which follow Fanny May and Freddy Mack guidelines Fanny May and Freddy Mack are large organizations that are called government sponsored Enterprises and they buy and sell mortgages now one of the reasons a conventional loan is very widely used is because there are many different usages for it some loans such as an FHA loan can only be used for primary residences however if you're using a conventional loan you can use that for a primary residence an investment property or even a second home this is one of the reasons why conventional loans are widely used now today we're going to be focusing mostly on primary residence conventional loans and what those guidelines look like we can cover investment property and second home loans in a different video so for primary residents conventional loans there are very many different ways you can get into that loan product one of the big myths around conventional loans is that you need 20% down to be in this loan and that is completely Incorrect and that is a myth that has been around for many many years so let's correct that right now if you are firsttime home buyer you can use a conventional loan with as little as 3% down let me repeat myself you can use a conventional loan if you're a first time home buyer with as little as 3% down and that product is offered by Fanny May and Freddy Mac and they're multiple types of products that offer this for first-time home buyers if you're not a first-time home buyer you can use a conventional loan with as little as 5% down so as you can see you do not have to have 20% down now one of the perks of having 20% down in a conventional loan is that you won't have private mortgage insurance or PMI I'm sure you've heard of this term if you have a high credit score and your debt to income ratio is within the range of where it needs to be for a conventional loan that PMI payment is going to be quite affordable I'm talking $1 to $200 a month in most cases and I could tell you from personal experience the first loan I got with my first house was a conventional loan I actually even used down payment assistance but I came into that loan with 3% down my private mortgage insurance was under $200 a month I just purchased my second home with a conventional loan with 5% down and my private mortgage insurance is around $200 a month so if you have 20% down that is fantastic and you will not have that private mortgage insurance however if you don't have 20% down it's also okay and in most cases it's going to be very affordable the one time with a conventional loan that private mortgage insurance gets expensive is if you have a low credit score if that is the case though a conventional loan may not be the best fit for you so that's where you'll want to speak with your mortgage adviser about what other options might be available to you that are going to give you more affordable terms another tip is if you don't have 20% down you will reach that 20% Equity point at some time in the life of your loan and when that happens another great feature of a conventional loan is that the private mortgage insurance can be removed so that is another reason conventional loans are very popular they have great features great terms and are most of the time going to be the most affordable option if you have a high credit score and a good debt to income ratio that Falls within the ranges that Fanny May and Freddy Mack have set for those conforming conventional loans another perk of a conventional loan is that you can use it for a wide variety of property types for example if you're using an FHA loan condos are not always going to be approved through FHA financing however if you're looking at a condo and using a conventional loan it's highly likely that condo is going to be approved now the condo still has to be reviewed by underwriting and all of that has to be verified for final loan approval but you are much more likely to be able to get that property type with a conventional loan again it really comes down to the variety and multiple ways that you can use this loan product which is why it's so popular to recap a conventional loan is not insured by the federal government is offered through private lenders there are a multitude of down payment options available to you depending on your situation and you're going to be able to shop for the most property types most of the time when you're using a conventional loan that's it for today I'm Hannah eser you can find me at hannaher tocom if you found this video helpful like And subscribe to the Bigger Pockets rookie YouTube channel thanks for watching and I'll see you next time [Music] oh [Music]

Channel: Real Estate Rookie

Views: 1,667

Keywords: conventional loan, how to buy real estate, what is a conventional loan, conventional loans explained, conventional loan vs fha, conventional loan vs fha loan, fha, fha loan, conventional loan requirements, mortgage, mortgage loan, mortgage rates, interest rates, real estate, how to buy a house, first time home buyer, first time home buyer loan, buy a rental property, 2024 conventional loan, conventional loan 2024, Hannah Escher, biggerpockets, rookie

Id: MrFox0Z_PLI

Length: 6min 38sec (398 seconds)

Published: Fri Apr 19 2024