What is a Conventional Loan?
A conventional loan is any type of mortgage loan that isn’t guaranteed by the federal government. When you have a conventional loan, it’s either conforming or non-conforming. A conforming conventional loan follows the guidelines as set forth by Fannie Mae and Freddie Mac, and a non-conforming conventional loan doesn’t follow these guidelines.
Let’s jump into some of the most frequently asked questions for conventional loans.
What are the Conventional Loan Requirements?
Most lenders require a credit score of at least 620 in order for you to be eligible for a conventional loan. Additionally, you shouldn’t have a debt-to-income ratio that exceeds 36%.
What down payment is required for a Conventional Loan?
With a conventional loan, you must put down at least 5% of the home’s purchase price but it’s generally recommended that you put down 20%. If you don’t put down 20% of the home’s price, you will have to pay private mortgage insurance (PMI) for the lifetime of the loan.
What type of properties are eligible for Conventional Loans?
Condominiums, modular homes, second homes, investment properties, primary residences, planned unit developments, manufactured homes and 1-4 family residences are all eligible for conventional loans.
Are Conventional Loans assumable?
In general, conventional loans are not assumable.