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Conventional Loan

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Credit Score Needed: 700+
Down Payment Needed: 3% to 10% minimum

Conventional Loan

Conventional Loan

A conventional mortgage is the preferred loan for many buyers and will finance most property types, including single-family homes, condominiums, townhomes, and multi-family units.

For the lowest conventional rates, you’ll need a 740+ credit score.

Occupancy rules for conventional mortgages are the most flexible of all loans. You can live in the home as your primary residence, have it as a vacation home or rental.

Conventional Mortgage Limits

Here are the single-family and multi-unit loan limits for 2021

# Units Most areas High-cost areas
1 $548,250 $822,375
2 $702,000 $1,053,000
3 $848,500 $1,272,750
4 $1,054,500 $1,581,750

 

Conventional Loan Down Payment

The required down payment depends on occupancy.

 

Private Mortgage Insurance

If you put down less than 20%, you’ll have private mortgage insurance (PMI), which can add $100 or more to your monthly payment.

Once you have 20% equity in your home, you can get the PMI removed.

 

 

Income Requirements

Besides credit and down payment, you’ll need enough income to pay a mortgage payment. That’s measured by looking at your debt-to-income ratio (DTI) – how much debt do you have compared to your income.
The maximum DTI for most conventional loans is 36% – 45% depending upon your credit. Here’s an example of a 41.6% DTI.

  • Total monthly debts – $2,500
  • Gross monthly income – $6,000

The calculation would be $2,500 divided by $6,000 = 41.6%.
If you receive child support, you may be able to count it in your income. Check with your loan advisor.

 

 

Conventional Loan Alternative

Conventional loans are the number one choice for many borrowers. However, an FHA loan could be the solution if your credit score isn’t high enough or if you have more debt.

Homestead is a top lender of conventional loans for purchasing and refinancing. Our rates are some of the lowest in the states we serve. Our loan advisors provide excellent service, as you can tell from our reviews. Plus, we close fast!

 

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