Conventional Loans

ConventioConv logonal loans are mortgages offered by non-government lenders. A conforming or conventional mortgage stays within Fannie Mae and Freddie Mac guidelines. When we think of a 30 year fixed rate mortgage we are generally thinking of a conventional loan however, there are many different types of conventional loans.

Many think that a 20% down payment is required for all conventional loans. This is not true. Conventional loans have as low as a 1% down payment option

See below for a list of common types of conventional programs and how to qualify for them.        Apply Now


20% or More Down PaymentFannie Mae-Logo
This is the flagship conventional mortgage program that accounts for about 60% of all mortgage applications.

  • 680+ FICO Score                                    
  • Low Rates
  • No Mortgage Insurance
  • Traditionally a 30 year fixed program

5% Down Conventional Programfreddie logo
A good alternative to FHA financing for those looking to refinance with limited equity or purchase with limited down payment funds.

  • 95% LTV                                                          
  • First time homebuyers ok!
  • No income limits
  • No reserve requirements
  • Gift funds eligible

3% Down Conventional – the 97 Program 
Another great low down payment option is this 3% down conventional mortgage. 

  • 640+ Fico Score
  • At least one borrower must be a first time home buyer
  • Primary Residence Only
  • Debt to Income may exceed 45%

3% Down Home Ready Programhomeready pic
This is a conventional option for buyers looking to purchase with a very low down payment or homeowners with limited equity looking to refinance.

  • Mortgage up to 97% including First Time Home Buyers                                  
  • High Balance available
  • Reduced Mortgage Insurance
  • Gift funds eligible
  • Income limits based on census tracts

3%-5Down Home Possible Program
Another low down payment program similar to Home Ready but no income limitations

  • Mortgage up to 97% including First Time Home Buyers
  • High Balance available
  • Reduced Mortgage Insurance
  • Gift funds eligible
  • NO Income limits based on census tracts

1% Down Payment Conventional
This is the lowest down payment available on a conventional loan.

  • 1% Down, Lender gift 2%                                         
  • 700+ FICO, 43% DTI
  • Available with no monthly Mortgage Insurance

Click here for other low down payment programs.


High Balance Mortgage
A High Balance loan is a mortgage above the conforming county limit of $424,100 but below the Jumbo limit of $634,100.  

  • 640+ FICO                                       HB mortgage
  • Up to 90% LTV
  • Includes Conventional, High Balance and ARMs

HARP 2.0
The Home Affordable Refinance Program for those in a Fannie Mae loan now, it was originated prior to May 31, 2009 and they are currently “upside down” on the property.

  • Up to 175% LTV/Unlimited CLTV                                           upside
  • High Balance and Condos up to 125% LTV

Other loans you may be interested in:                                  Other Info on Conventional Loans:

  • FHA                                                                                                                                       Debt to Income Ratios
  • VA                                                                                                                                          Documentation Needed
  • Jumbo                                                                                                                                   Appraisals
  • Non-QM                                                                                                                               Closing Costs

 

 

 

 

 

 

 

 

 


conventional-loan-requirements-note-250x250

2017 Conventional Loan Limits

The conventional loan limit for 2017 is $424,100. But Fannie Mae and Freddie Mac have assigned high-cost areas where limits are higher. In other counties for example a loan amount up to $636,150 is available.

Increased loan amounts are available for 2, 3 and 4 unit homes:

  • 1-unit home: $424,100
  • 2-unit home: $543,000
  • 3-unit home: $656,350
  • 4-unit home: $815,650

 

Documenting Income and Assets

Each applicant must provide documentation proving their income and assets as well as other items. Below is a quick list of the things that are needed (all items do not apply to every applicant):

  • Current Identification. Driver’s License or Passports are the most common.
  • Most recent 30 days of your pay stubs.
  • 2 years tax returns. All pages. All schedules.
  • 2 years W2s
  • 60 days of bank statements. All pages even if they are blank.
  • A copy of the earnest money deposit check (if a purchase).
  • A copy of your current mortgage statement, tax bill and homeowner’s insurance (if a refinance).
  • Social security, and/or pension award letters and 2 years of 1099s.
  • 401K or any other retirement accounts (most recent statements)
  • Rental agreements for any other properties currently owned.

 

Eligible Properties

There are several properties types eligible for conventional financing:

  • Single family homes
  • Condos
  • 2, 3, and 4-unit
  • PUDs, or Planned Unit Developments
  • Some co-op properties

Debt-to-Income Ratios

Debt to Income or DTI is a ratio between a borrower’s debts (including the new mortgage payment) and their income and is expressed as a percentage. An applicants “Ability to Repay” is a very important piece of the qualifying puzzle and it is how the purchasing power is determined. Traditionally, the max debt-to-income ratio (DTI) for a conventional loan is 43%. However, exceptions are commonly made for DTIs as high as 50% with strong compensating factors like a high FICO score and/or a lot of cash in reserves. If you have problems with your credit or don’t have any cash reserves, your maximum DTI will remain at 43%. If your income doesn’t support that amount then we will look at other programs for you like FHA, Non-QM or other types of Conventional loans.

Here is an example of how the Debt to Income ratio is calculated:

New Total Mortgage Payment = $1,950
Auto Payment = $250
Student Loan = $100
Credit Card Minimums = $225
Total Monthly Obligations (Debt) = $2,525
Monthly Gross Income Before Taxes = $7,500

Debt to Income or Debt Divided by Income for this scenario is $2,525 / $7,500 = 33.67% DTI which would qualify. 

 

 


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