What are the credit requirements for a Conventional home loan?
To determine if you qualify for Conventional loans, your lender will look at a few different key factors:
- Your credit history and credit profile. Now depending on your circumstances and your lender, the credit standards may be flexible. A FICO score of ~640 or above is very helpful
- Your income compared to your monthly expenses. The standard debt-to-income ratios are 43% for Conventional loans. These ratios may be exceeded with a variety of mitigating factors, for example, excellent credit.
- The underwriter will look at your overall pattern for the last few previous years.
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What’s the down payment required for Conventional loans and what will my interest rate be?
Your down payment and your interest rate will depend on a few different key factors. Obviously, the interest rate will vary from person to person and will always be a case-by-case determination. Be sure to check with your lender about current interest rates.
- Conventional loans require the potential buyer to put at least 3% – 20% of the sales price in cash for the down payment and closing costs.
- New for 2015, you can now potentially be eligible for just a 3 percent down payment on a Conventional loan. Please ask your lender about the rules and restrictions regarding this change to the guidelines.
- Your interest rate will depend on your credit score.
- Interest rates are driven by Mortgage-Backed Securities (MBS). These are “mortgage bonds”.
- Mortgage-Backed Securities (MBS) will determine the range of the interest rates in which your interest rate will fall somewhere in that range.
- The interest rate also depends on the whole amount of the loan. Normal loan limits are $510,400; in higher-cost areas, it reaches $765,600.
If you have credit concerns, we have partners that are experts in getting our clients “mortgage ready” with their credit scores.