A conventional loan typically requires solid credit, stable income, manageable debt, and a down payment that meets program guidelines. Exact requirements vary by lender, loan size, property type, and whether you’re a first-time buyer or repeat buyer.

Common conventional loan criteria include:

– **Credit score:** Many conventional programs require a minimum score around **620**, though stronger credit may help with more loan options and better pricing.
– **Down payment:** Some conventional loans allow as little as **3% down** for eligible buyers, while **5% down** is common for many primary residence purchases. Larger down payments may be needed for second homes, investment properties, or higher-risk scenarios.
– **Debt-to-income ratio:** Lenders compare your monthly debts to your gross monthly income. Conventional loans often allow ratios up to around **45%**, and sometimes higher with strong compensating factors.
– **Income and employment:** You’ll generally need documented, stable income. This may include pay stubs, W-2s, tax returns, bank statements, or other documentation depending on how you’re paid.
– **Mortgage insurance:** If you put less than **20% down**, private mortgage insurance is usually required. The cost depends on credit score, down payment, and loan structure.
– **Property standards:** The home must meet basic safety, condition, and appraisal requirements. Conventional appraisals are usually more flexible than some government-backed loans, but major issues can still matter.
– **Loan limits:** Conventional loans must meet conforming loan limits unless you’re using a jumbo loan. Limits vary by county and can change annually.
– **Reserves:** Some borrowers may need extra savings left over after closing, especially for investment properties, second homes, multi-unit properties, or higher loan amounts.

Conventional loans are a good fit for borrowers with decent-to-strong credit, reliable income, and enough funds for the down payment and closing costs. The specific approval path depends on the full file, not just one factor.

Conventional loans are mortgages that follow guidelines set by Fannie Mae and Freddie Mac (not backed by the government like FHA or VA). They’re the most common loan type in the U.S. and tend to offer flexibility for borrowers with solid credit and finances.

**Typical Conventional Loan Criteria:**

* **Credit Score:** 620 minimum is standard, though 660-740+ generally unlocks better pricing and lower mortgage insurance costs.

* **Down Payment:** As low as 3% for first-time buyers (via programs like HomeReady or Home Possible), 5% for most repeat buyers, and 10-25% for second homes and investment properties.

* **Debt-to-Income Ratio (DTI):** Generally capped at 45%, though some borrowers can stretch to 49-50% with strong compensating factors (reserves, high credit, large down payment).

* **Employment & Income:** Typically 2 years of consistent employment history in the same field, with documentation through W-2s, pay stubs, and tax returns. Self-employed borrowers usually need 2 years of tax returns.

* **Reserves:** Cash reserves (savings left after closing) may be required, especially for investment properties or higher loan amounts. Often 2-6 months of mortgage payments.

* **Property Type:** Primary residences, second homes, and investment properties all qualify. Single-family homes, condos, townhomes, and 2-4 unit properties are eligible.

* **Loan Limits:** For 2024, the conforming loan limit is $766,550 in most areas and up to $1,149,825 in high-cost markets. Loans above these limits become “jumbo” loans with different criteria.

* **Mortgage Insurance (PMI):** Required if you put down less than 20%, but it can be removed once you reach 20% equity-unlike FHA mortgage insurance, which often stays for the life of the loan.

* **Appraisal:** A standard appraisal is typically required, though some borrowers may qualify for an appraisal waiver through automated underwriting.

Conventional loans are often the best fit when you have decent credit, stable income, and at least 3-5% to put down. The pricing and flexibility usually beat FHA once your credit score is 700+.

A conventional loan is a mortgage not insured or guaranteed by a government agency like the FHA, VA, or USDA. Lenders evaluate your overall financial profile, but they generally focus on a few key criteria to determine eligibility.

While specific requirements vary by lender and program, here are the typical criteria for a conventional loan:

* **Credit Score:** A minimum credit score of 620 is generally required to qualify. However, a higher score (often 740 or above) is usually needed to secure more favorable terms and interest rates. Borrowers with lower scores may face stricter requirements in other areas.

* **Down Payment:** While many believe a 20% down payment is mandatory, it’s a myth. Conventional loans are available with as little as 3% down, particularly for first-time homebuyers. A down payment of less than 20% will typically require you to pay for Private Mortgage Insurance (PMI), which protects the lender if you default on the loan.

* **Debt-to-Income (DTI) Ratio:** Lenders calculate your DTI by dividing your total monthly debt payments (including your future mortgage payment) by your gross monthly income. Ideally, lenders prefer a DTI of 43% or less, but some programs may allow for a DTI as high as 50% if you have strong compensating factors, such as a high credit score or significant cash reserves.

* **Employment and Income:** You will need to provide proof of a stable and consistent income. Lenders typically want to see a two-year history of employment, which is verified through documents like W-2s, pay stubs, and tax returns.

* **Assets and Reserves:** You must demonstrate that you have sufficient funds to cover the down payment and closing costs. Lenders may also require you to have cash reserves, which are extra funds in your account after closing, equivalent to a certain number of months of your mortgage payment.