Conventional Loan

If you’re preparing to buy a home, you’ll find out about what’s called a conventional loan. After all, this type of loan represents the most popular option among homebuyers.

Those who meet the requirements to qualify for conventional loans often obtain flexible home financing that makes owning a home more affordable.

What is a Conventional Mortgage Loan?

You have several options when choosing the right loan for buying a home. Mortgage loans often differ depending on the requirements to qualify and the terms and conditions offered, such as the loan’s length, interest rate and minimum down payment.

Conventional mortgages are part of the standardized mortgage options established by two government-sponsored enterprises, Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation). “Fannie” and “Freddie” also define the criteria for borrowers, and those criteria provide the rationale for the requirements to qualify.

If you have a higher credit score, a conventional mortgage is a great choice for financing your home. Conventional mortgages include a range of options for the down payment, closing costs and monthly payments. (If you have a lower credit score, the requirements for a conventional mortgage may be higher.)

There are other common loan programs, such as those offered by the FHA (Federal Housing Administration) or VA (Veterans Administration). FHA and VA loans are distinct from conventional mortgages in that they’re insured by the government, and they allow for more flexible rules to qualify. (However, loan terms and conditions may be more difficult to customize or individualize.)

How to Obtain a Conventional Loan

If you’d like to discover your potential to qualify for a conventional loan, connect with us at Compass Mortgage! To help you understand the process and get started, we’ve outlined the steps and the documentation needed below.

The Financing Process

• Homebuyers often start by . . .
  • Requesting a quote for their interest rate OR
  • Beginning an application with Compass Mortgage
  • Working with Compass Mortgage to obtain a credit report and evaluate their financial situation
• As you share information about your potential purchase, we will. . .
  • Arrange for an appraisal of the home you wish to buy to determine its value
  • Discuss your individual options, including the terms and conditions for which you qualify
  • Detail the documents you need for underwriting to begin the loan on a solid foundation

We’re with you through each and every step . . . all the way to closing and finalizing your loan and purchase!

Conventional Loan Requirements

• Common requirements include . . .
  • Credit score of 620 or higher (preferable; often results in better interest rate)
  • Documentation which confirms debt-to-income ratio (DTI) at or below 50%
  • Employment verification and history
  • Down payment of 3% or more (based on income, number of home purchases, other factors)
  • Private Mortgage Insurance (PMI) if down payment less than 20% or until your equity in the home is 20% or more

If you have any questions, we’re here to help!