Conventional loans in Omaha NE

Are you looking to qualify for a conventional mortgage in Omaha NE? The conventional home loan is considered the “traditional loan” option. If you are a buyer with good credit, good income, and a decent amount of assets we will likely look to conventional financing first.

Conventional loan requirements

620 minimum credit score
50% max debt-to-income ratios
3% down payment available

Benefits of a conventional loan

3% down payment options
Low Mortgage Insurance
No Mortgage Insurance with 20% equity
Multiple conventional loans allowed at once
Considered the “easy” loan program

3% down payment options

Conventional financing is often mistaken for a 20% down program. While 20% down on a conventional loan does have benefits, it is not required for conventional financing. In fact, conventional offers a low down payment option that is less than 3.5% FHA down payment. Unlike FHA, the conventional loan does have restrictions on who can use this low down payment option. Check out some of our other articles for more detail on the conventional low down payment option, but there are income or first time home buyer restrictions. This is where it can get a bit confusing. So if you are a first time home buyer you can get a 3% down conventional no matter your income. If you are not a first time home buyer you can still do the 3% down option but there will be income restrictions.

Low mortgage insurance

When people ask the benefit of conventional over FHA the first thing I will point out is the Mortgage Insurance. FHA often has lower rates than conventional, but this is more than offset by the higher FHA mortgage insurance. Conventional typically has much lower MI than FHA and Conventional MI gets lower the more you put down. FHA has a flat Mortgage Insurance fee so it does not get higher or lower based on credit score and down payment. Conventional MI on the other hand improves with higher credit scores and a higher down payment. And again, it is almost always lower than FHA MI.

No Mortgage Insurance with 20% equity

The Mortgage Insurance on conventional financing gets lower the more you put down (dropping off at 20% equity). The great part about conventional financing is, even if you do not put down 20% when you buy a home, the Mortgage Insurance will drop off once you get to 20% equity in your home. This can be done by paying your loan down or by increasing the value of your home (or a combination of both). If you have a conventional loan with Mortgage Insurance it is important to monitor the value of your home and your loan balance to see when you can get the MI removed. Many lenders will not remove it automatically so you will have to keep on top of it for them.

Multiple conventional loans allowed at once

Conventional financing allows up to 10 active loans at the same time. This is useful for buyers looking to purchase a second home, a vacation home, or investment property. If you are considering renting out your current house, conventional will allow you to convert your current home to an investment property and buy a new home at the same time. The flexibility of conventional helps home buyers to start building their real estate portfolio.

Conventional financing is considered the “easy” loan program

The conventional loan program is considered the easiest loan to get closed. While I personally think FHA and VA loans are just as easy to close, the market considers these “easy” loans. What does this mean for a buyer? Well it means if you are competing with several potential buyers on a home and have a conventional pre-approval you are more likely to get selected. Agents and sellers consider this the easy program so if you have the same offer as an FHA buyer that agent and seller are more likely to select your offer. Some home sellers also limit the financing they will accept to conventional financing. In a competitive housing market (a seller’s market) having that conventional loan approval will give you an edge.

Why would a buyer use conventional financing?

The goal is always to qualify for conventional financing. The mortgage insurance benefits of conventional alone make it worth getting into the loan program. If you have great credit, income, and assets we will go conventional. If you do not qualify for conventional and have to go FHA, I will continue to monitor your mortgage and home value (along with your income, assets, and credit) to eventually refinance the loan into conventional financing.

Omaha Housing Statistics

Omaha is a stable home market with fairly steady appreciation whether the economy is booming or busting. Appreciation has been very high over the last 5 years but it is still not too far off the 10 year and even 60 year average.

Home appreciation – 60 year average 3.71% – 10 year average 3.65% – 5 year average 5.48%
Appreciation forecast over the next 5 years is 7.67%. Home prices are expected to increase!
Median Home Prices – $194,127 ($143 per sq ft)
Unemployment – 3.19% (national average – 3.6%)

Omaha Nebraska Conventional Home Loan