Conventional Loans


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  • Lower overall cost than some government programs with Mortgage Insurance, depending on Credit Score
  • No PMI with 20% down
  • NO upfront mortgage insurance premium
  • Fixed Rate with no prepayment penalty
  • Mortgage Insurance or PMI can be low with a >740 Credit Score
  • Mortgage Interest can be Tax Deductible, ask your CPA or Tax Planner for details
  • Wide range of terms 30, 25, 20, 15, 10 year fixed rates
  • Wide range of down payment choices: 3% (certain conditions apply), 5%, 10%, 15%, and 20% are most common
  • Available for Primary, Second homes, and Investment
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What are conventional loan requirements?

Here are the requirements:

  1. As low as 3% down, but 5% is most common
  2. PMI or Mortgage Insurance is added to loan payment with less than 20% down payment, no upfront funding fee
  3. Credit Score down to a 600, middle score of the three or lower of the two
  4. Debt to Income Ratio is 43% unless you receive a Desktop Originator or DO Approval which is automated, they can go as high as 50%, but the loan still needs to underwritten by lender underwriter
  5. Income must be steady and provable, two year work history is required with no gaps longer than 6 months unless you’re in school at a university
  6. Two months bank statements, additional reserves may be required, large deposits have to be sourced, NSF’s must be explained
  7. Primary Residence, no Second Homes (Vacation Homes) or Investment are allowed 1-4 units
  8. Borrowers must have valid identification and lawful residency i.e. Driver’s License, Social Security number, Work Visa

How does a Conventional Loan work?

A conventional loan has higher bar for loan approval than others. Usually borrowers with good credit and income can make higher down payments thereby getting rid of PMI Insurance. The minimum Credit Score is 620 although most borrowers with this score won’t choose a Conventional Loan, not advantageous.

What is a conventional Loan?

A conventional loan is a home loan program which adheres to Fannie Mae or Freddie Mac guidelines. Private lenders will underwrite and make the loan decision in accordance with Fannie Mae or Freddie Mac rules. It’s not a government guaranteed or insured loan.


What are the terms of a conventional home loan?
The terms for a Conventional Loan is 30, 25, 20, 15 and 10 Years

What is a drawback of 30 year conventional mortgages?
The main drawback is financing for 30 years but it’s also more affordable for most people who want to own
a home, the American Dream is alive and well. But a 30 year mortgage you’ll pay significantly more interest
over the life of loan compared to a 20 year or 15 year loan.

Should I take a 15-yr or 30-yr mortgage?
This answer is easy, if you can afford it choose a 15 year loan, interest rates are lower and you’ll
usually pay about a 1/3 of the interest over the life of the loan compared to a 30 year.

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