Conventional Loan Guide
Loan Type: Conventional Home Loan
Specific Uses: First Time Home Buyer, Refinance, Remove PMI (Mortgage Insurance), Debt Consolidation
What is a Conventional Mortgage?
A Conventional Mortgage is not insured or guaranteed by the federal government. A Conventional Loan can have either a fixed or an adjustable interest rate. This is a great loan option for first time home buyers, refinancing, cash out refinances, minimum down payment ability, average to excellent credit scores, debt consolidation and removing Private Mortgage Insurance.
Conventional Loan Summary:
This type of Home Loan is great option for those who have established equity in the property. If your loan currently has PMI (Mortgage Insurance) it can be automatically dropped off once you establish enough equity in the property. FHA Homes loans now have Mortgage Insurance for the life of the loan.
This Loan Type gives you more control over your monthly payment. However, this loan type can have stricter guidelines and slightly higher interest rates. The offset of the higher interest rate is due to the fact that there could not be any Mortgage Insurance premium per month. This is a great option for debt consolidation projects as well since you may be able to do so without any monthly Mortgage Insurance premiums depending on what the home appraises for. Any loan amount over the max loan amount is considered to be a Jumbo Home Loan.
Conventional Home Loan Guidelines:
- DTI: (Debt-to-Income) Ratio cannot exceed 43%
- Income: 2 Years full tax returns required
- Min Credit Score: 620 (depending on Lender)
- Max CLTV: (Combined Loan-to-Value) on a Conventional Home Loan is 97%
- Max LTV: on a Cash Out Refinance is 80%
- Collections: Any Collection balances over $2,000 must be collected or have made payment arrangements prior to closing.
- Max Loan Amount: 1 Unit Home = $417,000
2 Unit Home = $533,850
3 Unit Home = $645,300
4 Unit Home = $801,950
- Down Payment: Minimum 3% Down Payment required on Home Purchase loans
- Missed a Payment? Only two 30 Day Mortgage Late Payments allowed in the last 12 months.
Conventional Home Loan Facts:
- If you are located in a Community Property State, the lender is required to pull credit on a spouse that is not on the mortgage.
- When the Lender is verifying Assets, they will need to document source of funds of large deposits over 1% of the Loan amount.
- Debt-to-Income Ratio’s on a Conventional mortgage can vary depending on product type. For example, there is no cap on a HARP Refinance.
- Minimum FICO (Credit Score) Required = 620. Sometimes lower depending on the Lender.
There is still much more information about Conventional Home loans. Reach out to your bank or lender for more specifics on what you can qualify for.
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