Conventional Financing

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Conventional loans meet the requirements of the two largest buyers of mortgages in the United States Fannie Mae and Freddie Mac. They are not backed by the Government like an FHA or a VA loan. Almost all conventional mortgages are issued by private lenders. Often times conventional financing is looked at as the best form of financing during a purchase transaction. See below for some guidelines.

 

Minimum Credit Score – Varies a little lender to lender but is generally between 620 and 680.

 

Occupancy – Can be owner occupied but can also be a second home, rental or vacation rental unlike government backed loans.

 

Property Types – Single Family, Duplex, 2-4 unit complex, Condos and Townhomes.

 

Income - Verified with W2’s, Paystubs and tax return. Debt to income ratio needs to be 43% or less.

 

Assets - Assets will be verified to make sure there are funds to close and for the down payment.

 

Down payment – Ranges between 5% and 20%. Anything under 20% requires private mortgage insurance. PMI on a conventional mortgage is lower than the mortgage insurance required on an FHA loan. PMI on a conventional mortgage also automatically cancels once the loan to value reaches 78%.