The majority of conventional mortgage loans meet the criteria for sale to Fannie Mae or Freddie Mac. There are several different sets of guidelines that fall under Conventional Home Loans; there is no single set of borrowers’ requirements.
Interest rates on conventional mortgages are typically slightly higher than FHA loan interest rates and slightly higher than VA loan interest rates, but a conventional loan does not charge an upfront funding fee.
Conventional Home Loan Requirements
If you put less than 20% down on a conventional loan, you’ll have to pay for private mortgage insurance (PMI). In the event that you default on your loan, PMI protects your lender. The cost of private mortgage insurance (PMI) varies depending on the type of loan, your credit score, and the size of your down payment.
The good thing about PMI is that it won’t be a permanent component of your loan – you won’t need to refinance to get rid of it. When you have 20% equity in your house and are making regular mortgage payments, you can ask your lender to eliminate the PMI from your payments.
To qualify for a conforming conventional loan, your loan must be within the loan limits established by Fannie Mae and Freddie Mac. The loan limit is adjusted on an annual basis.
In most cases, you’ll need a credit score of at least 620 to qualify for a conventional loan. The debt-to-income ratio (DTI) is a proportion that indicates how much of your monthly income goes into debt repayment. Add up the minimum monthly payments on all of your debts (such as school loans, vehicle loans, and credit cards) and divide by your gross monthly income to get your DTI. Your DTI must be 50% or below for most conventional loans.
Why Choose a Conventional Home Loan?
Conventional loans have lower interest rates than other loan types. The amount of money you need to put down depends on your financial status and the sort of loan or property you’re getting. If you have good credit and a down payment of at least 3%, or possibly less with down payment assistance a conventional mortgage may be the best option for you.
To learn more about conventional home loans in Idaho contact our professional team at InterWest Mortgage to schedule an appointment for a consultation.
