Are you curious if you can qualify for a conventional loan in 2021? Including all of the new updates that have happened with conventional loans, especially because of COVID. Now, we're going to jam-pack this full of 2021 Conventional loan requirements.
So a quick overview with Conventional loans, conventional loans tend to be mainly for buyers with higher credit scores and minimum credit issues. Now it doesn't mean you have to have the most incredible credit score in the world. And we'll talk about credit score here in just a bit, but it tends to be a more favorable credit score.
To those with higher credit scores, also conventional loans don't require 20% down. There's this myth that's been going on for so long about needing 20% down for a conventional loan. It's just simply not true. You can go all the way down to 3% as a minimum down payment for conventional loans in 2021, 20% is where mortgage insurance gets removed. That's it. And we'll talk about that again, here in the future.
Conventional loans tend to be dictated by two GSEs or Government-Sponsored Enterprises. And what these are is Fannie Mae and Freddie Mac. You might've heard of them, but not actually known what they do or their importance. So Fannie Mae and Freddie Mac actually purchase mortgages. So they purchased them from lenders. Basically, Fannie Mae and Freddie Mac said, "we want to purchase loans, conventional loans that have a certain type of risk to them, a certain type of look.". And so Fannie Mae and Freddie Mac make the rules for conventional mortgages.
So what we'll be talking about in this here are the rules made by Fannie Mae and Freddie Mac. So basically what happens is your lender is going to give you the loan and they're going to underwrite it according to what Fannie Mae and Freddie Mac want. And then they're going to end up selling that loan to Fannie Mae or Freddie Mac in the future as a mortgage back security.
Now we don't have to get into all that, but it's helpful to know that there are these two companies, these two government-sponsored enterprises that are actually making up the rules for conventional loans. It's not necessarily lender by lender.
Conventional loans are going to be for a primary residence, second home, or investment properties. So we're going to talking about conventional FHA, USDA, VA. This is the only loan that we can use for a second home and an investment property as well.
So let's first quickly talk about COVID changes. Maybe you're familiar with conventional already, and you just want to see what's changed because of COVID. So the one big thing that's happened is the artificial raising of credit scores, as an overlay. So basically what happens is we talk about Fannie Mae and Freddie Mac, they make the base rules, and then lenders can tighten those at rules. They can add rules on top of the baseline rules whenever they want.
Again, this can make things more difficult to qualify for. So for instance, the base standard. If a 620 credit score, a lender if they want, can add a new rule on top of it that says their minimum credit score is 680. Even though it's a conventional loan, they can raise it up. So COVID has required a lot of lenders to do this.
So conventional loans haven't changed. The lenders have just added overlays on top of the base standards. Also, if you are self-employed, you're going to need a year-to-date profit and loss for 2020. And this can be unaudited. So you can just have this signed by yourself, or it can be audited. So if it's audited, you don't need to provide bank statements. If it's audited, you do have to require three months' bank statements to support the data in the profit and loss statement.
Also, future work normally is allowed on a conventional loan. Maybe you get a job offer where you can close on the loan before you start your new job.
However, with COVID lenders are putting on overlays where you can't actually use future employment. You're going to have to be employed in the job that you're going to be having while you're on that loan.
There's a couple of different, weird caveats here with conventional loans. It can be a little bit tricky to understand down payments. So let's first talk about a standard, what we're calling conforming conventional loan. When I use conforming, just think of like a standard conventional, what we're talking about. So you can actually go to 3% down if you're a first-time home buyer.
So that's one of the perks of conventional loans. Normally it's 5% down but if you're a first-time homebuyer, it can be 3%. Now there is a way to kind of hack this. If you're not a first-time home buyer, a little trick to get around it. Let's say, I am not a first-time home buyer, but I have somebody who wants to be on the loan with me who is. The role basically states you only have to have one person on the loan that's a first-time homebuyer.
So even though if I'm the one with the income and the credit and all the money that we're using to purchase the home, I can bring somebody on who is a first-time home buyer and then use that to get 3% down. And this is very common. If you're you have a spouse who hasn't purchased a home or something like that now, Fannie Mae and Freddie Mac both have programs called "Home Ready" and "Home Possible".
And what these allow you to do is 3% down as well even if you're not a first-time homebuyer. The only big thing you have to consider here is there is an area median income. There's an income limit that you have to hit to get this program and we'll cover Home Ready and Home Possible here in just a little bit.
So the standard is 5% down for conventional. These are the special cases. Herewith conventional rate, we either have to be in an income limit to hit home ready or home possible, or we have to be a first-time buyer to hit down to 3%. So the 5% is normally the standard for conventional as a down payment.
Closing costs are going to be the exact same as other loans. Closing costs are things like your appraisal, your title, your taxes, your homeowner's insurance, recording fees. These are things outside of the loan process that is involved in almost every single deal that you're going to be running into. Any lender or loan will have the same closing costs.
So these funds are going to be verified through two months of bank statements unless you're using other types of funds. Maybe you're using gift funds from a family member or maybe you're using a 401k loan or withdrawal. You know, other types of secured loans you can do.
And then just a quick note, I do have a lot of free tools that you can use, If you text #sub to 937 358-6542, I'll text you over a link to all the freebie tools that I have, included on this website.
For credit score requirements, 620 is the minimum credit score with all lenders for conventional loans. Now, with that being said, 680 tends to be the best, credit score to have to get the best rate. It seems like if you have lower than a 680, you're going to have higher rates and higher mortgage insurance than if you have a 680+.
So even though you can qualify, if you have in between a 620 and a 680, you tend to get a much higher rate and pay much more and mortgage insurance because conventional wants to, mainly give loans to higher credit score buyers. So they tend to penalize some of the mid-credit score buyers.
Also, two-year history of credit is preferred. Sometimes you can get away with having a little bit less if you have alternate trade lines. But most of the time conventional is going to want to see two years plus.
Also, if you don't have any credit, you can actually get a conventional loan. Zero credit is different than bad credit. If you have bad credit, a conventional loan is probably not the best for you, but if you have zero credit, meaning there's no credit score at all, then you can use trade lines. So you can use something like rental history, you can use auto payments. You can use utility bill payments as trade lines to show on-time payments instead of a credit score.
Credit events, what are the waiting periods that we have to hit? If we had kind of a derogatory or negative credit event in the past. So if we had a deed in lieu or a short sale, we need to wait four years. If we had a foreclosure, we need to wait seven years. If we got to chapter seven, bankruptcy or waiting four years and a chapter 13 bankruptcy or waiting two years from the discharge or four years from the dismissal.
So these restrictions can be a little bit tight, especially on that foreclosure. You might need to go more with something like an FHA loan, that's more forgiving on that side.
Student loans are our big issue for people in qualifying because a lot of loans like these government loans tend to not be receptive to income-based repayment plans. And so this is where it can really affect how much we can afford. So student loans can really change our qualifying amount, how much home we could get approved for.
So again, here's Fannie Mae and Freddie Mac. We had these two different GSEs, these government-sponsored enterprises, and they both have different rules about student loans.
So even though they're both conventional loans, depending on what company it's going to be sold to changes the rules. And you can talk with your loan officer about this, you know, what type of underwriting are we going to be using? And most likely there'll be able to tell you either we're using Fannie Mae and we're going through DEO, the Desktop Originator underwriting system or we're using Freddie Mac and we're going through LPA, the Loan Product Advisor underwriting system.
So Fannie Mae basically says they're going to use the minimum payment on the credit report, or if it's deferred, they're going to use 1% of the loan balance as a monthly payment. Income-based repayment is allowed. So if your income-based repayment says you only have to pay $0 a month on your student loans, then that's what's going to be used in your debt to income ratio.
Now, if you're using Freddie Mac underwriting, it says minimum payment on the credit score or. If it's zero if it says there's no, payment. So if it's deferred or if you're on an income-based repayment plan, it shows zero on your credit report. You have to use 0.5% into the monthly payment and IBR is not allowed on Freddie Mac loans. So it's a little different, so we have to keep it in mind.
So, for example, if we had $30,000 in student loans and let's say it was an income-based repayment plan, and maybe right now, we're just paying, you know what? We're not paying $0 a month. We don't have to pay anything on our student loans. Well, we went with Fannie Mae underwriting, conventional loan, Fannie Mae $0 a month is included in our debt-income ratio.
However, if we went Freddie Mac, it's $150 a month included in our debt to income. That's $150 a month that we could've used to qualify for a little bit more house now rates. So rates for conventional loans. Right now we're hovering around an average of 2.7 to 2.8% at the beginning of 2021.
So 3% down is usually going to have a higher interest rate than 5% down. We talked about 5% is more of the standard for conventional 3% has some of those special use cases, either we're a first-time buyer or under an income limit. And I'll talk about that tool here in just a little bit.
There's gonna be a link for that in the description. But normally if you're looking at 3% down, have your loan officer also show you the rate for 5% down, because most often you're going to find 5% down, has a lower interest rate. And lower mortgage insurance and then 3% down and conventional loans are going to have a higher rate than government loans most of the time, but they're actually going to be cheaper in your net cost because the rate isn't everything.
We also have to consider the cost of mortgage insurance that these government loans have. So conventional loans can actually save you money, even if the rate seems like it might be higher than something like an FHA loan.
So that brings us to mortgage insurance. So there's no required upfront mortgage insurance, things like VA, FHA, and USDA all have upfront mortgage insurance required to be wrapped into the loan.
Conventional loans don't have that at all. Also, monthly mortgage insurance with PMI was called Private Mortgage Insurance is required if you have less than 20% down. And here's something that a lot of people just don't know. They think the mortgage insurance falls off as soon as you hit 20% equity.
That's actually not true. At 20% equity, you have to request, for the lender to remove the mortgage insurance. At 22% equity then is when it automatically falls off. So at 20% equity, normally they're going to run a couple of calculations to see that you're at that percentage and then they can take it off for you.
But if you don't request it to come off from your lender, they're probably going to keep it on until you have that additional 2% equity and then let it automatically come off. So if you're around that range, keep that in mind that you might need to request that too come off.
Mortgage insurance is different on conventional loans than other government loans like FHA, VA, and USDA. The reason why is because of conventional loans, base mortgage insurance on the risk of the buyer. So depending on the credit score, what's the debt to income ratio, how many buyers are actually on the loan, that's going to change with the mortgage insurance cost is going to look like it tends to be around 0.5% to 1%, annually.
So it's something to kind of keep in mind. You know, if we're getting an FHA loan, no matter our credit score mortgage insurance is going to be the same for every single person, same with USDA. B conventional the lower the debt-to-income ratio, the better we're going to get with mortgage insurance.
For property requirements, we can do two to four units. Obviously, we can purchase a single-family home with one unit, but we can also do two to four units. If we do a secondary home, it's 10% down. Keep in mind, we can use investment property. We can either live in the home if it's multiple units, or we can use it as an investment property.
But conventional changes a lot of their down payment requirements depending on the situation. So depending on if it's a primary residence? Is it secondary? Is it an investment? How many units are there? That's going to change the down payment.
So let's run through some example homes with conventional. So, here is a home in, Santa Clarita, CA. This is $850,000, five beds, three baths, almost 3,300 square feet. So this is a nice home. It's got a turret so you could practice shooting your arrows outside of that if you wanted to. And you've got a cool little sweeping staircase, or a spiral staircase, this is a nice home. We can get it with a conventional loan. Again, this is under the loan limit.
There's another home in Dayton, Ohio, and this is actually the city that I live in. So this is a nice little home here. We got a nice kitchen. This is 294, almost $295,000. Four beds, three baths, 2,500 square feet, and we can get this no problem with a conventional loan.
So loan limits, conventional loans do have a limit with how much you can get with a home. So the new loan limit for most areas is $548,250. That's an increase of $37,850 from last year. So when we figure out how much home we can purchase, we have to do a little bit of some reverse math.
So we take the loan limit in our area and divide it by, how much loan we're taking out. So for doing 3% down, it's 0.97. For doing 5% down, it's 0.95. For doing a 20% down, it's 0.8. So we take the loan limit divided by our loan value ratio. That's going to give us the max purchase price that we can get.
If you want to check that out for your specific county, you can check out this loan map: https://ami-lookup-tool.fanniemae.com/amilookuptool/.
So now let's dive into the appraisal requirements. Conventional loans have a lower standard of living compared to something like FHA, which really tightens the livability quality that FHA requires. So, in the guidelines, there is a piece of interesting information on what you can do with conventional loans.
So Fannie Mae, again, that's one of the government-sponsored enterprises and it's applying the same for Freddie Mac as well. So if any Mae permits, appraisals to be based on the as-is condition of the property, provided existing conditions are minor and do not affect the safety soundness or structural integrity of the property. The appraiser's opinion of value reflects the existence of these conditions. Minor conditions in deferred maintenance are typically due to normal wear and tear from the aging process and the occupancy of the property. While such conditions generally did not rise to the level of required repair, they must be reported.
Appraisal for FHA
Examples of minor conditions and deferred maintenance include worn floor finishes or carpet, minor plumbing, leaks holes in window screens, or cracked window glass. So a good example here is if you're getting an FHA loan, cracked glass is not going to work. It's going to have to be re-fixed.
Appraisal for Conventional
If you're getting a conventional loan, what's interesting is you can have the report or your loan officer can tell the appraiser, "Hey, we want this to be as is". So the appraiser will make a note, "we have cracked windows, cracked glass over here". So can you change the value of the home to adjust for that there? So they'll probably take a little bit of the appraisal value down because of that. That is a problem, but it won't need to be fixed before you close on the loan.
So conventional can be a lot more lenient compared to something like an FHA loan.
So employment, conventional loans want a two-year history of stable employment. That doesn't mean one job for two years. That just means a two-year history and so included in that might be you're a stay-at-home mom. Maybe you were furloughed from work. There's something that happened in there. You just need to show two years of what's happened in the past. So you don't have to have a set length of time at a specific job.
Mostly what the underwriter's looking for is they want to see the consistency of income. Not necessarily how long you've been at one job. So what's best is to make sure that everything is in the same line of work. So let's say that you are a plumber and in the past two years, you've worked for six different plumbing companies, that's perfectly fine. You don't have to have two years at one specific company. Just show a two-year history. You just have to report the two years and then as long as it's within the same line of work, and then you won't have any issues qualifying with your new employment if you just got hired somewhere.
So normally to establish consistency of employment within the same line of work and underwriter tens, don't want to see two pay stubs to be able to confirm how much. This is normally around two to four weeks.
This is how much we can qualify for, with a conventional loan. That's very important to remember here that just because a lender will give you money, it doesn't mean you should take it out. Most often a lender is going to give you way more money than you should probably ever take out as a loan.
So your lender is not a financial advisor. Their interest is not in your well-being financially, necessarily. Their only interest is managing the risk on who is going to pay back their loans. So we have to keep that in mind.
There's no front-end ratio. Most loans have a front-end ratio. The front-end ratio is, what's our future housing expense divided by our gross income. That's going to give us a front-end ratio. Normally this is capped out, which lowers how much we can afford, as a maximum, but there is a 49.99% back-end ratio maximum.
49.99% back-end ratio maximum
So what that means is we take our monthly gross income and we can multiply it times 0.4999. And that's going to give us the maximum amount of monthly debt we can have. So this is going to include our future mortgage payment, principal interest taxes, insurance, homeowners, association fees if there are any. Plus mortgage insurance, if that's included in there, plus anything that we pay as a minimum monthly debt payment.
So it's our minimum payment on student loans, car loans, credit cards, things like that. That's the maximum that we can have when we multiply it times that just under 50%.
If we made $50,000 a year, and this can be individual, this can be household just depends on how you're applying for the loan. $50,000 per year income. If we have zero debt, we can get up to a $2,082 mortgage payment and that's pretty significant. Again, cause there's no front-end housing ratio, it's only the back-end.
So if we have zero debt, the only debt we're going to be taking on is the housing payment. So we can go up to $2,000 housing payment with a $50,000 income. Again, this is important to keep in mind. The lender is not interested in managing your finances. That's your job to keep in mind to track your budget.
The lenders are only interested in if people are going to pay back this loan, and these are the rules that they have. So if we have $500 a month in debt, then that drops us down to, we can get a future mortgage payment of up to $1,582.
So it's the same thing with a $100,000 income. If we have zero debt, we can take on a maximum mortgage payment of $4,165 per month. If we have $500 a month in debt that lowers to $3,665 per month as a future housing payment. So you can use that future housing payment to try to figure out a little bit of what you can purchase as a maximum purchase price. Because you need to stay at that limit or below when you're looking at homes.
Seller credits are how much the seller can give us towards our closing costs to help pay those down. This is negotiated in your contract upfront. You need to write this in with your realtor or by yourself if you're doing it alone and conventional changes, how much you can ask for depending on how much you put down.
So if we're putting less than a 10% down payment, the maximum that we can ask from the seller is 3%. So if we're looking at a $200,000 house and we want to ask for 3% closing costs, we put in our offer to say, we'd like 3% of the purchase price towards their closing costs. Then, the seller, if they agree would give you $6,000 towards their closing costs. If you're putting 10% down, it's 6% as a max. If you're putting 25% down, it's a 9% as a max. And if you're looking at an investment property, you can only ask for up to 2% in closing cost credit.
Now I have never seen any ask for six to 9% on a conventional loan most of the time I see around three in our area here, our average or median price tends to be a lot lower than it is in most of the nations. So, I don't tend to see people ask for that much in seller credits. Often seller credits are not that high.
They tend to be a lot easier for foreclosed homes. Again, this goes back to the appraisal requirements because there are a lot more lenient and closed homes contend to be in a little bit of some disrepair than conventional loans are normally your best bet if the home has some issues.
Also, a lot of people don't know this. You can get an appraisal waiver. So an appraisal waiver is where you just don't have to do an appraisal at all. And some people think, why would I want to do that? Because in a lot of buyers' minds, they think, well, if the appraisal comes in short, I get to buy the house at a discount.
As that's not true, most of the time, what happens if an appraisal comes in short, the deal's dead. You can negotiate it. Sometimes it happens where a buyer can get home a little bit. But it creates so much stress for everybody. And most of the time I see deals simply fall apart. Because either the seller's not willing to come down or the buyer's not willing to bring extra money to the closing table.
So an appraisal waiver speeds up the process a ton. If you get an appraisal waiver, you should be able to close that loan within two weeks instead of a normal 30 days, you should be able to close it somewhere within 15 days. Now to get an appraisal waiver, you need high credit scores, I think 720 - 740+ and a minimum of 20% down.
Not all homes qualify for an appraisal waiver. Basically what's happening is Fannie Mae and Freddie Mac are using, a bunch of data algorithms and stuff like that to figure out that home's historical data. And if what you're offering for it tends to fall in line with what they're seeing in their kind of predictive model. So, there's no clear answer on if a home is going to be able to qualify or not, with tools that you have access to.
There also is a renovation loan called homestyle, which is going to be similar to the FHA 203K, and another cool trick that most people don't know. Most lenders don't know this, because they're not brokers, but if we get an appraisal with, let's say an FHA loan, it's actually going to stick with the property.
So if I'm looking to buy a home with an FHA loan, and it appraises low. Let's say it appraises $10,000 low. Seller's not willing to budge. I'm not willing to bring more money to the closing table. Well, that FHA appraisal sticks with the home for four months. I can't get a new appraisal. All right, until after that period expires and most of the time, at that point, the seller is going to walk away.
However, if you're using a conventional loan if you want to take the risk and try another appraisal and see if the value changes, which often it does, appraisals are subjective. You can actually get another appraisal if you switch lenders.
So it can not be with the same lender. It has to be with a different lender. So the reason that is brokers tend to know this a little bit more is that as a broker, we work with several different lenders. So if we're working with a client with a lender, A and that appraisal comes in short, they do have the option of, we can switch that loan to lender B and get a new appraisal through lender B.
We tell them full disclosure. There's no guarantee it could come in even lower, or it could come in higher. There's no way of knowing, but it's something that somebody can do if they want that option on a conventional loan.
Again, these are those two options available by Fannie Mae and Freddie Mac.
So Home Ready is Fannie Mae and Home Possible is Freddie Mac. These are the two programs. They do have an income limit, but they will allow you to do 3% down. So basically what they say is it's designed to help lenders confidently serve today's credit-worthy, low-income borrowers.
So this is who they designed this program for. So it's 3% down, you get lower rates than a normal, conventional loan, and lower mortgage insurance. You don't have to be a first-time homebuyer. There is an income limit. It's 80% of the area, median income.
Here's the link https://ami-lookup-tool.fanniemae.com/amilookuptool/, so you can go find your location. It's going to show you what the income limit is for your specific location.
Here's the link and then, you also want to put how you have to take a very easy, but very dumb and annoying, home buyer course. And this is just, an online course, and all the ones that I've seen, I've gone through a couple of them. They're long and they're tedious and they tell you some good info but not a ton of stuff. It's just annoying, but it's required on Home Ready and Home Possible loans. You don't have to go sit down somewhere and listen to somebody talk. It's normally an online class.
After you get this loan, there are no streamlined options. So most loans like FHA, VA, and USDA have what is called Streamline Options, where you won't need to get an appraisal, or they don't have to recheck income or credit. However, conventional does not have that as an option. So you do have to get a new appraisal. They have to recheck your income and employment and recheck your credit.
There are two options when we're refinancing conventional. Number one is a Limited Cash-Out Refi. This used to be called a Rate and Term Refinance. Typically what's happening here is, if you got a conventional loan last year, your rate was 4%. Well, rates have dropped.
Now you do a rate and term refinance to lower your interest rate to maybe 2.75. Cash-out refinance is where we can do the same thing. We're refinancing that first loan so we can change the interest rate if we want to, but we're also pulling out equity as a lump sum.
So at the closing table, we would get a check for the equity in our home. So this is where we're taking out a bigger loan so that we can pull out some equity. Maybe we use that to pay down debt or put towards an investment or, or whatever you want to do there.
So now let's have a cost comparison and we're gonna do this with a 720 score. So I'm comparing four loans, there is going to be this standard conventional. This is for first-time homebuyers. They may have a home ready at 3% down, a 5% down standard, a conventional loan, and then an FHA loan for comparison. And this is all with a $300,000 property. So the down payment is all listed and all with 30-year loans.
There are also the rates where home ready has a little bit lower rate. Also, the 3% down has a higher rate than 5% down. Then also FHA has a lower rate of all three of them. However, we'll see how much more expensive it is. So it's not all just about the rate here.
So we can also see mortgage insurance is cheaper on Home Ready. It's even cheaper when we put more money down.
They are all pretty similar. FHA is where it gets a lot more expensive. And we think why in the world, we have a lower interest rate it's because the mortgage insurance is so much more expensive on FHA loans.
For the 30-year net cost of each of these loans, the cheapest tier is this 5% down and then that is followed by the 3% Home Ready, 3% neural. Then FHA's cost difference over 30 years is just over $50,000 which is higher. So even though FHA had that lower rate, it has that mortgage insurance that makes it so much more expensive.
So the differences between, these three loans here, over a 10 year period. Your cheapest option is the 5% down conventional, so that is number one. Your next cheapest option is 3% down Home Ready, it's $5,000 more expensive than the 5% down option. Your next cheapest option is 3% down conforming conventional, and that's almost $11,000, more expensive than 5% down. And then your worst option, which I would never recommend, in this scenario with a high credit score is FHA. That's going to be almost $17,000 more expensive over 10 years than the 5% down loan.
So seller perception, when we're using loans, we have to keep in mind how the seller is going to look at the financing that we're using because they're going to get to see, are they using a conventional loan? Are they using cash? Are they using an FHA loan?
Conventional loans are seen as the standard option for sellers. Most sellers expect a 30-day close. They expect to see a buyer using some sort of financing and they normally expect it to be a conventional loan. So this is good, right? We don't really come at a disadvantage using conventional and actually, often conventional loans can be seen as more preferable than cash. Not necessarily because it's a conventional loan and we think, cash would be more preferable because there's a higher guarantee of its closing, and it can close faster, but keep in mind, people with cash offers tend to lowball a seller.
They tend to come up with cash and say, offer you cash. We'll close it quickly. I can guarantee that I'll close it, but I want to offer less money because of that ease. So since the sellers are in their mind, most of the time preparing for a 30-day close and they prepare for financing. They tend to rather go with a conventional loan that is going to be offered at a higher price than a cash offer.
Now, that's not always true. And it's going to depend on your market and all sorts of things, but for the most part, conventional loans, sellers are expecting. So when we can offer them a good price, we have a higher chance of them accepting our offer compared to so many other types of financing, including cash.
But especially, Government loans like FHA, VA and, USDA, Conventional beats those out by miles, just because sellers can get a little bit afraid of these government loans, even though they're good programs.
To apply for a conventional loan, what we're going to do is we're going to shop with three different types of lenders. The reason we're shopping with three different types of lenders is we want to see a good spread of different types of lending companies and what they can offer for us. So I think you only need to get three quotes before you decide on a lender. Otherwise, we get stuck in kind of like analysis paralysis.
We can't make decisions because we have too many options in front of us, kind of like when you go to the grocery store and you want to pick up ketchup, and there's like 40 different types of ketchup and you're thinking, I just don't know. Just tell me, just give me ketchup. I don't care about if it's GMO and organic and all of that junk or, maybe do, that's just me, I guess.
So I want you to shop with a local credit. Then shop with a local broker and local can be to your state. It doesn't have to be like your city. And then I want you to shop with a bank or a direct lender. That's going to give you a good spread to see what kind of options can be presented to you with a conventional loan.
So you can compare them side by side to see which is going to be your best conventional offer. Conventional loans tend to need a little bit more time to shop with because if you're a conventional buyer, you're going to tend to have higher credit, maybe more income and, more savings. So, you know, lenders tend to prefer those types of buyers, prefer to give out loans to less risky buyers. So they tend to be more competitive and aggressive.
They want to earn your business maybe a little bit more than a lender who is just, primarily giving out government-backed loans. So shop with these three to see what's going to be your best option for conventional.
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