Conventional Loan Guidelines

Conventional mortgages are loans not backed or insured by the federal government. These loans typically have less stringent approval guidelines than FHA or VA home loans but can be more difficult for consumers with challenged credit to obtain. Knowing the guidelines for a conventional mortgage approval can help a home buyer decide which loan program is best suited to their financial needs.

Eligibility

The owner must occupy the residence as a primary residence or homestead. This type of loan caters to first-time and seasoned home buyers.

Credit

The minimum credit score needed to obtain a conventional loan is 680. The borrower cannot have any late payments or collection accounts posted to their credit report within one year of applying.

Debt to Income Ratios

Borrowers cannot have more than 45 percent of their income dedicated to secured or unsecured debt. This includes student loans, personal loans, credit card payments or car loans.

Down Payment

The minimum down payment required can be as little as 5 percent. Borrowers putting 20 percent down will not have to pay monthly mortgage insurance premiums.

Funds to Close

The buyer must be able to provide evidence of sufficient funds to close on a property. This is typically 3 percent to 6 percent of the purchase price.

References

• Conventional Loan Underwriting Guidelines; CalHFA; 2008
• Mortgage Loan Programs