A conventional loan is the most common type of mortgage in the industry. Conventional loans are not insured by the federal government, and thus have stricter lending requirements. Many prospective homeowners believe that a conventional loan can only be acquired by putting at least 20% down on a home purchase, and while this has been true in the past, many programs that we offer allow you to obtain a conventional loan with as little as 5% down for a primary residence, and even as low as 3% down if you are a First-Time Homebuyer.
A subset of conventional loans is a conforming loan. These two terms are oftentimes mistakenly used interchangeably, however while all conforming loans are conventional loans, not all conventional loans are conforming. To explain further, conforming loans have loan amounts within your specific county's loan limits. On average, this loan limit is $647,200, however in higher priced counties like Los Angeles, the conforming loan limit is
increased to $970,800 as of 2022. If you obtain a mortgage with a loan amount over your county's loan limit, while still considered a conventional loan, your loan is "nonconforming", or now considered a jumbo mortgage. This is important as "high balance" or "jumbo" mortgages have different debt-to-income and down payment requirements.
In order to qualify for a conventional loan, you would need to show proof of income (W2s, paystubs, tax returns, etc.) and asset statements to show that you have the required funds to complete the purchase. Conventionally loans can be amortized over any number of years ranging from 8-30 years, and you may elect to have a fixed interest rate or an adjustable rate (ARM) that incentivizes you with a lower "teaser" rate before the adjustment period. Speak to one of our Mortgage Experts today to review your options and learn more about conventional loans.
First-Time Homebuyers, 3% Down
First-Time Homebuyers may qualify for a mortgage with as little as 3% down. If you have owned a home in the past, you may still be considered a First-Time Homebuyer as long as you have not been on title for any properties in the past 3 years.
Minimum Credit Score of 620
A rule of thumb for conventional loans is the minimum credit score requirement of 620. Keep in mind some lenders may have overlays that require an even higher minimum.
Impounds Not Required
Unlike government financing where you must pay your taxes and insurance included in your monthly mortgage payment, most conventional loans allow you the freedom to pay it separately from your mortgage.
