CONVENTIONAL LOANS

• A  Conventional Loan is a type of mortgage that is not backed by the U.S. federal government and is available through private lenders.
• Conventional Loans are the most popular type of mortgage loan. They come in a range of terms including the common 15-year and 30-year terms. Since conventional mortgage loans are not insured by the government like FHA or VA Loans, they have stricter credit standards. Some Conventional Loans have the option for down payments as low as 3%* of the purchase price, but if you put down less than 20% you will have to add Private Mortgage Insurance (PMI) to your payment for a period of time.

Conventional Loan Eligibility

Anyone can apply for Conventional Loans — whether you’re moving up to a larger home, downsizing, buying a vacation home, or buying for the first time. However, all applicants must meet certain loan requirements, including: 

• Proof of employment history and verifiable income
• A risk based decision is made based on credit profile and ability to repay. 
• A debt-to-income ratio (DTI) of 45% or less (see below)

Conventional Loan Credit Score Requirements

• Conventional mortgages generally require higher credit scores (typically at least 620) and lower DTI ratios than government-backed mortgages such as FHA Loans. There are several ways to raise your credit score before applying for a  mortgage.

Conventional Loan Down Payment Requirements

• Many people believe that you need a 20% down payment for a Conventional Loan,  and while a 20% down payment means you won’t have to pay mortgage insurance, there are also low-down payment options. Qualified buyers can put as little as 5%** down on their Conventional Loan payments and, in some cases, even 3%*. 

Conventional Loan Debt-to-Income Ratio (DTI) Requirements

• Your DTI is one-way lenders assess how you manage your finances. The highest allowable DTI ratio for a government-backed loan is 50% but it’s typically in the 43% - 45% range for Conventional Loans. Your DTI is your total  recurring monthly debts (student loans, credit card payments, etc.), divided by your monthly pre-tax income, expressed as a percentage. For  example, if your rent is $1,000 per month, your car payment is $500 per month, and your monthly credit card payment is $800, your total monthly debt is $2,300. If your gross income is $6,000 per month, then your DTI is roughly 38% (2,300 ÷ 6,000 = 38.3).

Alternative Loan Options (Reduced Documentation)

• Bank statement loans 
• Asset-based loans 
• P&L-based loans for self-employed borrowers
• Stated Income - No Verification of income