Conventional Loans

What is a conventional loan?

These are the most common home loans in the mortgage industry. They are issued by private lenders, such as banks, credit unions, or other financial institutions and follow the guidelines dictated by Fannie Mae and Freddie Mac, the federally backed home mortgage companies created by the United States Congress. These also conform to the loan amount limits set by the Federal Housing Finance Administration (FHFA) which are updated annually based on market appreciation.

What are the general requirements to qualify for this type of loan?

These typically have stricter credit requirements to qualify compared to government agency loans like FHA, USDA, or VA. You generally need a mid-fico score of at least 620 and a back-end debt-to-income ratio at or below 50%. Minimum down-payments can start as low as 3% for first-time homebuyers on a primary residence and increase based on property type, loan purpose, and occupancy type.

What types of properties can I use this loan on?

Being this is the commonly used mortgage, most residential home purchases and refinances can use this type of loan. There are different requirements that must be met for unique property types such as condos, multi-units, and manufactured homes but overall conventional mortgages are a staple when it comes to standard residential homes.

Is there mortgage insurance for this type of loan?

Mortgage insurance is usually required when you have a conventional loan and have less than 20% equity in the home. If it’s determined that you need Private Mortgage Insurance (or PMI), your lender will coordinate with a private insurance provider and the terms of the insurance plan will be provided to you before you close on your mortgage. Options for mortgage insurance include Monthly, No MI, and Single Premiums.

Who are these loans best suited for?

These loans are generally a great option for borrowers with good to excellent credit, low debt-to-income ratios, and at least a 3-5% down-payment plus funds for closing costs. Conventional loans are also great options for investors and second home buyers with suitable funds for down-payments, closing costs, and reserves.

Team TLC Lending Loan Officer

Team TLC Lending

View All Testimonials