What is a Colorado Springs Conventional Loan?
A Colorado Springs conventional loan is a mortgage loan not insured by the federal government and it’s one of the most popular types of home financing options.
These loans often require a higher credit score and a larger down payment compared to government-backed loans, but they come with the flexible term lengths and competitive interest rates.
Conventional loans are Ideal for borrowers with stable finances and good credit because they offer the potential for more savings over the life of the loan. They also come with fewer restrictions and more options for property types.
Conventional Loan Benefits
Conventional loans come with many benefits such as:
- Lower Interest Rates: Competitive rates for borrowers with strong credit.
- Flexible Terms: Choose from various terms, typically 10 to 30 years.
- Lower Down Payment: Down payment options available with as little as 3% down.
- Faster Loan Processing: Streamlined procedures for quicker closings.
- No Mandatory Mortgage Insurance: Possible elimination of PMI once you reach 20% equity.
- Wide Property Selection: Suitable for various property types, including second homes and investment properties.
- Higher Loan Limits: Access to higher borrowing amounts compared to many government-backed loans.
- Easier Refinancing: Simplified refinancing options without strict government loan constraints.
- Less Stringent Appraisal: Often more lenient property standards compared to government loans, providing more buying options.
Colorado Springs Conventional Loan Requirements
To qualify for a conventional loan in Colorado Springs, borrowers typically need to meet the following criteria:
- Credit Score: A minimum credit score of around 620 is often required, but you will get a better interest rate the higher your credit score is.
- Down Payment: Down payments can be as low as 3% (depending on the lender), but a 20% down payment will eliminate the need for private mortgage insurance (PMI).
- Debt-to-Income Ratio (DTI): Lenders usually prefer a DTI ratio of 43% or lower, which indicates that you manage your finances well.
- Employment History: A stable job and income history for at least two years is usually required to show lenders you have reliable income.
- Property Appraisal: The home you want to buy must appraise for the purchase price or higher, so the lender’s investment is secure.
- Documentation: You will need to provide financial documents, including tax returns, W-2s, bank statements, and any other relevant financial information, to verify your income and assets.
How to Apply for a Conventional Loan in Colorado Springs
Get Pre-Qualified: Begin by contacting our team at Colorado Springs Home Loan. We’ll look over your financial situation and quickly assess your borrowing capacity. This first step helps set realistic expectations for your home search and prepares you for the next stages.
Find Your Ideal Property: Now you can start looking for a home that suits your needs and falls within your price range based on the budget from our pre-qualification. Consider things like location, size, and amenities to find a property that aligns with your lifestyle.
Submit a Loan Application for Pre-Approval: Once you’ve found a home, the next step is to complete a full mortgage application. This step is more in-depth and requires a comprehensive check of your financial background such as your credit score, income, and assets, to secure pre-approval.
Property Appraisal: After your loan application, we will arrange for a professional appraisal of the property. This is crucial to make sure the home’s value matches the loan amount and it protects both your interests and the lender’s investment.
Underwriting Process: With the application and appraisal complete, our underwriters will review all the information. They check for accuracy and compliance with lending guidelines to make sure everything is ready to finalize the loan approval.
Close on Your Loan: The final step is closing, where you’ll sign the loan documents, finalize the down payment, and cover any remaining closing costs. Once this is done, the loan is complete, and you’re ready to move into your new Colorado Springs home!
Thinking about buying a home in Colorado Springs? See how our conventional loans can work for you. Apply now to see how much home you qualify for!
Conventional Loan Limits in Colorado Springs
The 2024 conventional loan limit for El Paso County, including Colorado Springs, is $766,550. This amount represents the maximum amount that borrowers can borrow through a conventional mortgage for a single-family home. Why does this matter?
This is important because it affects the range of properties you can afford without needing a jumbo loan, which typically has stricter qualifications and higher interest rates. Knowing the loan limit can help you budget and make your home search more effective in the Colorado Springs real estate market.
Conventional Loan Terms & Types
There are different types of conventional loans available, such as the 30-year and 15-year fixed-rate mortgages. The 30-year fixed-rate mortgage is popular for its stable payments and long-term affordability. The 15-year fixed-rate mortgage is great for those looking to pay off their home faster and save on interest.
Imagine two borrowers taking out loans for the same $300,000 home. One chooses a 30-year fixed-rate mortgage with a 4% interest rate, resulting in monthly payments of about $1,432. The other opts for a 15-year fixed-rate at 3.5%, with monthly payments of approximately $2,144. The 30-year loan offers lower monthly costs, while the 15-year loan means higher payments but more interest savings over time.
Adjustable-rate mortgages (ARMs) are another type of conventional loan that offers lower initial rates that adjust over time based on market conditions. An example of an adjustable-rate mortgage (ARM) is a 5/1 ARM. This loan has a fixed interest rate for the first five years. After that, the rate will adjust annually based on the market conditions.
ARMs are suited for those who plan to move or refinance before the rate increases, or those who can expect a future raise to afford the potential of higher payments.
What Credit Score Do you Need to Get a Conventional Loan in Colorado Springs?
You can qualify for a conventional loan in Colorado Springs with a credit score of at least 620. However, a higher credit score of around 740 or above, will often get you a better interest rate and loan terms.