Conventional Loans

Conventional loans are “conforming” loans, which means they meet Fannie Mae and Freddie Mac guidelines. However, they are not government-backed loans like FHA and VA loans. Additionally, they typically have stricter requirements compared to these other loan types. Despite this, conventional loans are still the most popular loan type in the country.

 

Down Payment

For conventional loans, the minimum down payment can vary between 3-5% depending on factors such as income and the type of property you are buying.

 

·               Conventional loan with PMI ·                5% down
·               Fannie Mae HomeReady ·                3% down
·               Freddie Mac Home Possible ·                3% down
·               Conventional loan (No PMI) ·                20% down

 

Credit Score Requirements

For conventional loans, the minimum required credit score is 620. However, some lenders that utilize overlays may have higher credit requirements. As of January of 2022, the average credit score for a conforming, conventional loan was a 744.

 

Debt-to-income Requirements

The debt-to-income ratio represents how much of your gross monthly income (unless you’re self-employed) is going towards monthly debt payments. For conventional loans, it is important that your back-end ratio does not exceed 45%.  Important payments that are included in your debt-to-income ratio are typically things like personal loans, credit card payments, car payments, and your prospective mortgage payment.

 

Private Mortgage Insurance (PMI)

Private mortgage insurance is a form of insurance that is meant to protect the lender should the borrower stop making payments. It is typically a part of your total monthly mortgage payment. It is required on a conventional loan, if the borrower puts less than 20% down on their home. If you put down 20% or more, you will not be required to pay private mortgage insurance, and if you are paying it and reach 78% LTV, the lender will automatically remove PMI from your monthly mortgage payment.

 

Loan Limits

Maximum Baseline Loan Amounts for 2024

Units Contiguous States, DC, and Puerto Rico Alaska, Guam, Hawaii, and U.S Virgin Islands
1 $766,550
$1,149,825
2
$981,500
$1,472,250
3
$1,186,350
$1,779,525
4
$1,474,400
$2,211,600

 

Maximum Ceiling for Loan Limits in High-Cost Areas for 2024

Units Contiguous States, District of Columbia
1 $1,149,825
2
$1,472,250
3
$1,779,525
4
$2,211,600
*Alaska, Hawaii, Guam, Puerto Rico, and the U.S Virgin Islands do not have any high-cost areas for 2024.
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