A conventional mortgage is a loan that the federal government does not guarantee. Conventional mortgages may be either “conforming” or “non-conforming.” Conventional mortgages are available in both fixed-rate and adjustable-rate varieties.
If you are planning to purchase a home and are considering a conventional mortgage, read our guide below on how to qualify for one.
Conventional Mortgage Requirements
A conventional mortgage is the most common type of mortgage used by borrowers. There are a few different requirements you’ll need to meet to qualify for a conventional mortgage:
- A minimum credit score of 620
- A down payment of at least 20 percent of the home’s purchase price
- A maximum debt-to-income ratio of 45 percent (This means that your monthly debt payments, including your mortgage payment, should not exceed 45 percent of your monthly income.)
- Proof of income and employment (Lenders will want to see that you have a steady income and a good employment history.)
- A clean credit history (Lenders will pull your credit report to see if you have any red flags in your financial history.)
How to Qualify for a Conventional Mortgage
- Get your financial documents in order. It is imperative for you to have a steady income and a good credit history. You must also provide various financial documents, including your tax returns, bank statements, and pay stubs.
- Find a lender. Once you have your financial documents in order, you will need to find a lender who is willing to give you a loan. There are several ways to find a lender, including online directories and word-of-mouth.
- Apply for a loan. After finding a lender, you must fill out a loan application and provide the required documentation. The lender will then review your application and make a decision.
- Get pre-approved. Getting pre-approved for a loan is a good way to know how much you can borrow and what interest rate you will be charged. It is important to note that being pre-approved does not automatically mean you will get the loan.
- Make a down payment. Most conventional mortgages require a down payment of at least 20 percent. This means that you will need to have a good chunk of money saved up in order to qualify.
- Close on the loan. Once you have been approved for the loan, you will need to sign the paperwork and pay any closing costs. After that, the loan will be funded and you will be the owner of your new home.
The Benefits of a Conventional Mortgage
If you’re looking to buy a home, you may wonder if a conventional mortgage is the right type of loan. After all, there are several different types of mortgages out there, and it can be hard to know which one is right for your needs.
Here’s a look at some of the benefits of a conventional mortgage:
- You can get a lower interest rate. One of the most significant benefits of a conventional mortgage is getting a lower interest rate than with other loan types. This can save you a considerable amount of money over the life of your loan.
- There are no monthly mortgage insurance premiums. You will not have to pay for mortgage insurance with most conventional loans. This can save you a significant amount of money each month.
- You may be able to qualify for a shorter loan term. With a conventional mortgage, you may be able to choose a shorter loan term than you would with some other types of loans. This can help you save money on interest over the life of your loan.
A conventional mortgage is obviously a great option for homebuyers. There are many benefits to taking out a conventional mortgage, including the fact that you may be able to get a lower interest rate than you would with an FHA or VA loan. If you are considering taking out a mortgage, be sure to compare all of your options before making a decision.
Contact Your California Mortgage Expert Today!
For conventional loan solutions, turn to Mortgage Consultants Group. For over 29 years, we have been making homebuyers’ and homeowners’ dreams come true with flexible financing for every need. Whether you are shopping for a new home or you want to refinance your mortgage, you will find the ideal home loan quickly and easily with the help of our friendly loan experts. Apply now!