Conventional Purchase

If you’re preparing to buy a house, you’ll likely consider a conventional purchase loan. Afterall, it’s the most popular option among homebuyers.

Those who meet the qualification requirements for conventional loans often get flexible home financing that makes owning a home affordable.

What is a Conventional Purchase Loan?

You have a handful of options when choosing the right loan to buy a home. These loan types often differ based on their qualification requirements and the terms they offer, such as the loan’s length, interest rate, and minimum down payment amount.

Conventional purchase loans are part of the standardized mortgage options established by government-sponsored Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation). For this reason, conventional qualification requirements are based on standardized borrower criteria.

Simply put, if you have a higher credit score, a conventional purchase loan is a great choice for financing your home. It opens up options for your down payment amount, closing costs, and monthly payments. With a lower credit score though, you may need to meet higher minimum requirements to qualify for these benefits.

Other common loan programs like FHA or VA loans differ in that they’re insured by the government. They allow for more flexible qualification rules, which may also come with less customizable loan terms.

How to Get a Conventional Loan

If you’d like to see whether you qualify for a conventional loan, connect with us. To get you started, we’ve outlined the steps and documentation needed to help you understand the process.

The Financing Process

Homebuyers often start by requesting a quote for their interest rate or beginning an application with a lender. By sharing basic information about your potential purchase, we’ll work with you to pull your credit report and discuss your finances, as well the potential value of the house you’re interested in purchasing.

As we move through the process we’ll arrange for an appraisal of the house to determine its value. We’ll also discuss the terms you qualify for and your options, as well as request various documentation for the underwriting process to make sure the loan begins on a solid foundation.

We’re with you through each step, leading to closing where we’ll finalize your affordable loan when you’re ready to purchase.

Conventional Loan Requirements to Meet

These are some of the common requirements often needed to qualify for a conventional purchase loan. If you have questions about these requirements, we’re here to help.

• In most cases it’s best to have a credit score of 620 or higher. With higher credit scores often comes better interest rates.
• Through underwriting evaluation, you’ll need documentation of consistent income with a Debt-to-Income ratio at or below 50%. This ratio shows how much of your monthly income goes to paying your debt.
• Along with income information you need to share employment verification and history.
• First-time homebuyers need a down payment of 3% or more. This minimum requirement goes up based on your income, if it’s a second home purchase, and other factors.
• A down payment less than 20% requires paying Private Mortgage Insurance (PMI) premiums until you’ve paid 20% equity into the home, meaning you reach a Loan-to-Value ratio of 80%.

Conventional Loan FAQs

Financing a home is an important investment. It’s ok to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.