Conventional loans for North Carolina buyers

How conventional compares with government loans

Most buyers we talk to are choosing between a conventional loan and one of the government programs. The right answer usually comes down to your credit score, how much you have saved and the kind of home you are buying.

• Conventional

  Backed by private investors.

  • ●Low down payment options available
  • ●Mortgage insurance only with less than 20% down, and it can come off
  • ●Primary homes, second homes and investment properties
  • ●LifeStart assistance not currently offered
• FHA

  Backed by the Federal Housing Administration. See FHA loans.

  • ●Low down payment
  • ●Upfront and monthly mortgage insurance
  • ●Primary residence only
  • ●LifeStart assistance available
• VA

  Backed by the Department of Veterans Affairs. See VA loans.

  • ●No down payment for eligible borrowers
  • ●No monthly mortgage insurance; a funding fee usually applies
  • ●Primary residence only
  • ●LifeStart assistance available
• USDA

  Backed by the U.S. Department of Agriculture. See USDA loans.

  • ●No down payment
  • ●Upfront and annual fees
  • ●Primary residence in an eligible area
  • ●LifeStart assistance available

We run the numbers on each option you qualify for, so you can compare the monthly payment and the total cost, not just the rate.

What lenders look at

Every file is a little different, but a conventional lender will review four things:

• Credit

  Your score affects both approval and pricing. Small improvements before you apply can make a real difference in your payment.

• Debt-to-income

  Lenders compare your monthly debts, including the new house payment, with your gross monthly income.

• Savings

  You need funds for the down payment and closing costs. Some loans also ask for a cushion of reserves after closing.

• Work history

  Two years of steady income is the usual starting point. If you are self-employed, see our self-employed loan page for how income is documented.

How private mortgage insurance works

If you put less than 20% down on a conventional loan, the lender adds private mortgage insurance, often called PMI. It protects the lender, not you, and it shows up as part of your monthly payment. PMI does not last forever. Once you have paid the loan down far enough, or your home has gained value, you can ask your servicer to remove it, and federal rules require it to end automatically at a set point in your loan's schedule. That is one of the main differences from FHA mortgage insurance, which often stays for the life of the loan.

Homes, second homes and rentals

Conventional is the most flexible loan type for property use. You can buy the home you live in, a vacation home, or a rental property. If you are buying to rent out, our investment property loans page explains how lenders treat rental income. If the price puts the loan amount above the conforming limit, you are into jumbo loan territory.

Down payment help on conventional loans

Gift funds from family are allowed on most conventional loans, with a signed gift letter. Our in-house LifeStart down payment assistance is focused on government loans right now, so we don't currently offer it with conventional financing. If assistance matters to you, we'll show you how an FHA, VA or USDA loan with LifeStart compares.

Conventional loans in Concord and Charlotte

We're based in Concord and work with buyers across Cabarrus County, Charlotte and Mecklenburg County and the rest of North Carolina. If you are buying your first place, our first-time homebuyer guide walks through the steps before you start touring homes.