Whether you plan to purchase a new home or refinance an existing mortgage, knowing the ins and outs of conventional home loans will help you in securing the right financing. Let’s go over the details of conventional mortgages, such as what they are, how to qualify, and what the process of getting one looks like.
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What Is a Conventional Home Loan?
Conventional mortgages are the most common type of loan in the real estate industry. They are originated and funded by private lenders such as banks, mortgage companies, credit unions, and other financial institutions, and then are often sold to government-sponsored entities such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Conventional mortgages can be used for refinancing or new purchases, feature competitive rates, and offer terms ranging from five to 30 years.
There are typically two types of conventional home loans — conforming and non-conforming. Conforming mortgages are loans that meet certain conditions as outlined by Fannie Mae and Freddie Mac. Conforming loans typically require a loan limit that doesn’t exceed $548,250. Non-conforming loans, often referred to as jumbo loans, are mortgages for loan amounts above those limits–typically used for luxury homes.
Conventional Home Loan Requirements & Process
To receive all the benefits associated with a conventional loan, borrowers will have to meet certain basic requirements.
You might find in your search for a loan that other types of loans are more beneficial for you. For example, first-time home buyers, borrowers with more debt, and those with more modest credit ratings may have trouble qualifying for a conventional mortgage. Others who may not qualify for a conventional mortgage include those who have filed for bankruptcy or don’t have cash reserves for a down payment. If you fall into those categories, you might consider looking into something like an FHA loan.
Although qualification requirements may vary based on loan amount and lender, the common requirements for securing a conventional mortgage include:
A credit score of 580 or higher.
We accept credit scores as low as 580 for conforming conventional loans. Higher credit scores, however will likely result in better loan terms.
Although not all conventional loans require large down payments, the more money you put down, the lower your interest rate will likely be. We accept down payments as low as 3% for conforming loans—or with no down payment at all, for buyers who qualify for our Zero Dollar Down Loan.
Low debt-to-income ratio.
Typically, lenders require a debt-to-income ratio of 36–43% or less, but may be flexible if you can make a higher down payment.
Proof of income and assets.
Lenders will need to see proof that you can afford your mortgage payments. This may include employment verification, documentation of assets, gift letters, and more.
The Home Loan Expert Can Help!
Although the process of buying a home and securing financing can be overwhelming, the Experts are here to streamline and simplify the loan process for you. At The Home Loan Expert, we move quickly to find you the conventional loan you need at the lowest possible rate with terms that fit your budget — completing the process, underwriting, closing, and funding all in house. That’s something you won’t find with a mortgage broker!
We’ll also walk you through the process of securing your conventional home loan step by step, ensuring that you feel confident in your loan. Our team closes conventional loans quickly, easily, and with the best customer service to make the process simple.
With our easy-to-use mortgage calculator, you can easily get an idea of the various loan options available to you. And our team is always ready to help! Contact us to see how much we can save you on your new conventional loan.