Conventional Loans
What are Conventional Loans?
Conventional loans are loans that are not backed by a government agency. These loans re offered by private lenders such as banks, credit unions, mortgage brokers and online lenders. These loans are typically amortized
over a period of 15-30 years. These loans can be conforming, meaning they fall under qualifications set by Freddie Mac and Fannie Mae, or non-conforming, such as jumbo loans.
Benefits of a Conventional Loan
Some of the benefits of a Conventional loan are:
- No upfront mortgage insurance
- Possible lower or no mortgage insurance
- More appealing to sellers
- Viewed as less risky for lenders
- Typically closes faster than non-conventional loans
Qualifications for a Conventional loans
Qualifications for a Conventional Loan include:
- Having a minimum credit score ranging from 620-640
- Must verify income and employment with documents such as bank statements, W2's and tax returns
- Typically requires a down payment of at least 5-20%
- Most lenders require a debt-to-income ratio no greater than 43%
- Private Mortgage Insurance will be required for borrowers paying less than 20% down. PMI typically costs .05% and 1% of the total loan amount on an annual basis