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Conventional Loan

What is a Conventional Loan?

A conventional loan is a type of mortgage loan that is not insured or guaranteed by the government. It is offered by private lenders, such as banks, credit unions, and mortgage companies. Conventional loans are often the best option for borrowers with good credit and a stable income, as they typically offer lower interest rates and fees than government-insured loans.

There are two main types of conventional loans: conforming and non-conforming. Conforming loans meet the guidelines set by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which allows them to be bought and sold on the secondary mortgage market. Non-conforming loans do not meet these guidelines, and are typically more difficult to obtain.

 

What are the Conventional Loan Requirements?

 

To qualify for a conventional loan, you will need to have a down payment of at least 3% of the purchase price of the home, a credit score of at least 620, and a debt-to-income ratio below 45%. You will also need to provide documentation of your income, assets, and employment history.

To qualify for a conventional loan, you will typically need to meet the following requirements:

  • Credit score: Most conventional lenders require a credit score of at least 620, although some may require a higher score. A higher credit score may help you qualify for a lower interest rate.

  • Down payment: Conventional loans typically require a down payment of at least 3% of the purchase price, although some lenders may require a higher down payment for certain loan programs.

  • Debt-to-income ratio: Your debt-to-income (DTI) ratio is a measure of how much of your monthly income is used to pay debts. Most conventional lenders require a DTI ratio of 45% or lower, although some may allow a higher ratio in certain cases.

  • Employment history: Most lenders will require you to have a stable employment history with a minimum of two years of continuous employment.

  • Asset reserves: Some lenders may require you to have a certain amount of money in savings or other assets, such as stocks or bonds, to qualify for a conventional loan.

  • Property type: Conventional loans can be used to purchase a variety of property types, including single-family homes, multifamily homes, and condominiums.

 

 

Keep in mind that while conventional loan have some amazing benefits, they may also have stricter qualifying requirements compared to other loan types, such as government-insured loans like FHA, VA, or USDA. It’s important to consider your options carefully and choose the loan that best meets your needs.

 

To get started on your Conventional loan pre-approval, call

The Letson Group

today at 719.247.6622.

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