Michael Holigan: Paulette Gonyea didn't want to spend a lot of time trying to acquire a loan and didn't want a lot of paperwork. She and here husband decided the best possible loan for them was a conventional one.
Paulette Gonyea: We were trying to do this in a reasonable amount of time, that our credit was very good, and that we would go through their mortgage company in order to get the price that we wanted on this home.
M.H.: Conventional loans are offered by a variety of people, including mortgage bankers, brokers, banks and even savings and loans. They're by far and away the most popular loan, but since they're not insured or guaranteed by the government, they do have stricter lending requirements. In most cases you need a good credit report to qualify for a conventional loan. In some cases a larger down payment may be required, anywhere from 55 to 20% of the purchase price. Most of the cash investment must come from your own pocket, not from a gift. The qualifying ratios are higher than FHA or VA loans on the front end, 33%. On the back end, 36%. So if your gross household is $5,000 a month, with a 33% front ratio, your payments can't exceed $1,650 a month. With a back end ratio of 36%, you can only afford $1,800 a month for total house payment and reoccurring debt, such as car payments or credit crd payments. But the Gonyea's, like other people, know that conventional loans can have a more competitive interest rate, and they're less of a hassle than government insured loans.
P.G.: I'm familiar with those, and I knew they would take a long time, there's a lot more paperwork, and it's time consuming, and we just didn't want to bother with that. We didn't find it necessary.
M.H.: Conventional loans are normally thought of as 30 year fixed interest rate notes. This isn't really true now, because there's thousands of lenders out there looking for new ways to loan you money. A few choices include adjustable rate mortgages, graduated payment mortgages, even balloon notes. This gives you flexibility to find a loan that fits your budget and lifestyle.
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Episode 33 1996 - 97 Season
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