HomeSmart, Evergreen Realty
Frank Velasco, HomeSmart, Evergreen RealtyPhone: (714) 478-8747
Email: [email protected]

How to Qualify for a Conventional Loan

by Frank Velasco 07/26/2020

Photo by Evan Dvorkin on Unsplash

A conventional loan is the most common type of mortgage used to secure a home purchase. Conventional loans are backed by private lenders and typically conform to the standards established by Fannie Mae and Freddie Mac. In order to qualify for a conventional loan, you must meet several specific requirements. 

1. Debt-to-income ratios. 

In order to qualify for a conventional loan in a specific amount, you must meet the lender's established debt-to-income ratio requirements. This means that you must show that the ratio of your revolving monthly debts to your monthly income does not exceed a certain percentage. 

2. Down payment. 

To qualify for a conventional loan, you must typically make a large payment upfront known as a "down payment." Ideally, this payment should equal at least 20 percent of the cost of the home. However, if you cannot pay 20 percent down upfront, a smaller down payment may be acceptable. If your down payment is less than 20 percent, the lender may require you to pay mortgage insurance, which will increase your monthly payment amount. 

3. Credit score. 

To qualify for a conventional loan, you must have a decent credit score. The minimum credit score required is usually around 640, but exceptions can sometimes be made for a lower credit score. It is important to note that your credit score may have an impact on your mortgage interest rate. In general, borrowers with higher credit scores will qualify for better interest rates than borrowers who have lower credit scores. 

4. Income stability. 

Before your conventional loan can be approved, your lender will want to see evidence that you have a reliable source of income. Your lender may ask to see records of your employment history, as well as evidence that your job is expected to continue. 

5. Loan limits. 

Conventional loans are subject to limits with regard of the maximum amount you can borrow. Your loan must fall within these limits in order to qualify for your lender's program. The specific limit varies according to your location. 

6. Credit history. 

Before approving your loan, your lender will review your credit history. If you have negative entries, such as missed payments or accounts in collections, you may be asked to provide an explanation. 

Requirements for conventional loans may vary by lender. Some specific borrowers, such as those with a short employment history, may also need to meet additional requirements. To find out the exact requirements you must satisfy, contact a lender to discuss your desired loan. 

About the Author
Author

Frank Velasco

With over 20 years of experience in the Real Estate Industry, 10 of which were directly working for a

Mortgage Lender, Servicer, Title Insurance Company, and Escrow Company. Well rounded in

knowledge and experience of the complete transaction from start to finish. The purchase or sale of a

home for most people is the biggest investment or sale that they will make in their lifetime; my

knowledge in Finance and Accounting is an added plus to my clients. I am a Real Estate Consultant, not

just a Real Estate Agent. Committed to providing the best service possible. With a complete team of

professionals working for you. Serving the Orange County Area, specializing in the City of Tustin,

Orange, and Irvine. I take my designation as a Realtor very seriously and uphold its professional

integrity standards to its fullest.

Using the latest technology allows my team and me to provide you with the latest up to date Real Estate

Market information. Providing professional, personalized service allowing for a successful Real Estate

transaction.

In the 36 years of living in the Orange County area, I have seen not only the growth of the Orange

County Real Estate market, but also the change in one of the greatest areas to live in the country.

Whether your planning on buying, selling, or have a question feel free to contact me.

Affiliations:

 National Association of Realtors (NAR)

 California Association of Realtors (CAR)

 Pacific West Association of Realtors (PWR)

 National Association of Hispanic Real Estate Professional (NAHREP)

 B.S. Accounting (SDSU)