A conventional mortgage is a loan for the purchase or refinance of a home that is not guaranteed or insured by the federal government (like a VA or FHA loan is). A conventional mortgage is set by limits set forth by Freddie Mac and Fannie Mae guidelines. The loans are typically offered by banks, credit unions,and mortgage companies. Conventional mortgages are also available at a fixed or adjustable rate and available in 15, 20, or 30-year terms.
Conventional Loan Qualifications:
- The standard debt to income ratio of 45% or less is required for conventional loans. This ratio may be exceeded with compensation factors.
- A FICO score of 620 or above is necessary in obtaining approval.
- Minimum of 2-year employment history is required.
- A minimum of 3% down payment is required. PMI is not required with 20% down payment.
Conventional Loan FAQ
- Who are Freddie Mac and Fannie Mae? These are two government-controlled companies that provide money for the U.S. housing market.
- What types of properties can qualify for a conventional loan? Just about any type of residential property can qualify for a conventional loan: primary residences, 1-4 family residences, condos, modular homes, manufactured homes, second homes, and even investment properties and planned unit development.
- What are the typical interest rates of conventional loans? Interest rates can change everyday (sometimes more than once a day), and are determined by the value of mortgage backed securities (MBS). MBS determine the interest rates based on market indicators. For a current rates, contact our office at (813)655-4663. Factors that can affect which mortgage rates are as follows:
- Size of down payment
- Your credit score
- The loan type
- The property type
- Whether the property will be owner occupied, an investment, or a second home
- The purpose of the loan (purchase, refinance, cash-out refinance)
- Do conventional loans require an escrow? Yes. Borrowers who make a down payment of 20% or more, can choose whether or not they wish to use an escrow.
- What is an escrow? Taxes and insurance costs are included into your monthly mortgage payment. When a payment is made, the amounts for each are collected and placed into an escrow account. When these items come due, the lender will make the payment for your property taxes and homeowner’s insurance policy.