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Full-Service Loan Originators
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CONVENTIONAL HOME LOANS
CALIFORNIA HOME LOAN LENDER
The LOAN Lady HOME LOANS
CONVENTIONAL HOME LOANS
A conventional loan refers to any mortgage that is not supported by the federal government. The majority of conventional loans are also considered "conforming loans," as they comply with the lending standards established by Fannie Mae and Freddie Mac.
Fannie and Freddie oversee the process, private lenders like The LOAN Lady Home Loans provide CONVENTIONALANS for homeowners in California. Applicants can obtain these loans from various sources, including banks, credit unions, mortgage lenders, or mortgage brokers as Joanna Perry.
INTERESTING FACT:
Most U.S. mortgages are conventional loans and if you're buying a home, there's a good chance this is the type of loan you'll use.
CLIENT TESTIMONIAL
"I highly recommend Joanna Perry and her team! I have had the pleasure of working with her on several transactions and have recommended her to friends and family who have also had nothing but extremely positive things to say. Trustworthy, knowledgeable and just a lovely person as well!"
J K D., Stevenson Ranch, Southern California
CONVENTIONAL LOAN REQUIREMENTS 2025
Typically, borrowers with good credit, a stable income, and some funds for a down payment meet the qualifications for conventional loans. However, since conventional loans are not insured or guaranteed by a federal agency, their eligibility criteria are generally more stringent compared to government-backed mortgages.
Conventional loan requirements vary by lender.
Most conventional loans must meet the guidelines Fannie Mae and Freddie Mac set.
These include:
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Minimum credit score requirement of 620
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Minimum down payment requirement of at least a 3%
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Maximum debt-to-income ratio of 43% (can be up to 49%, depending on qualifying factors)
Keep in mind that conventional lenders can impose stricter requirements than those
established by Fannie Mae Freddie Mac.
The Importance of Maintaining Your Credit Score
The minimum credit score needed for most conventional loans is typically . However, some lenders might require a higher score. While a slightly lower credit score may be accepted, usually impose a higher interest rate to offset the increased risk. Conversely, individuals with higher credit scores are more likely to qualify for lower rates.
Those with lower scores or a less-than-perfect credit history might consider an FHA loan. This type of loan does not impose additional fees or higher interest rates on borrowers with lower credit scores. It's important to review your credit report before applying for a mortgage, so you are aware of your financial standing.
THE LOAN LADY HOME LOANS
Benefits of Conventional Loans
Conventional loans are often considered the most common type of mortgage. Nonetheless, government-backed mortgages offer distinct advantages, such as lower down and more flexible credit requirements. This flexibility is particularly beneficial for first-time home buyers.
FLEXIBLE REPAYMENT TERMS
Conventional loans provide various repayment options in terms of 10, 15, 20, 25, and 30 years, with some lenders allowing custom terms between 8 and 30 years. Shorter terms typically have lower interest rates but higher monthly payments. A 30-year fixed-rate conventional loan still offers accessible, low fixed-interest payments for most home buyers and refinancers.
ADJUSTABLE RATES AVAILABLE
Conventional loans are also a smart choice for those who aren't staying in their home long and want a short-term adjustable-rate mortgage. This option has a lower interest rate than a fixed-rate loan. Adjustable rates are fixed, but only for a period of time — usually 3, 5, or 7 years. During that initial fixed-rate period, the homeowner pays lower interest and can save thousands.
NO UPFRONT MORTGAGE INSURANCE FEE
Conventional loans do not require an upfront mortgage insurance fee, even if the buyer puts less than 20% down. FHA, USDA, and even VA loans require an upfront insurance fee, usually between 1% and 4% of the loan amount. Conventional loans only require a monthly mortgage insurance premium when the homeowner puts down less than 20%.
CONVENTIONAL HOME LOANS
Conventional home loans have low down payment requirements, which makes them a great option for many first-time home buyers. Check your conventional loan eligibility with a lender. If you don't qualify, apply with another. It's best to get preapproval with The LOAN Lady Home Loans.
DOWN PAYMENT
Repeat and first-time home buyers often secure a conventional loan with a down payment as low as 3%. However, this requirement conventional loans is flexible. Lenders may have varying down payment guidelines based on your specific mortgage needs. Here’s what can anticipate.
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5% down payment for repeat home buyers and those who earn less than 80% of the area median income (AMI)
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5% down if you’re financing with an adjustable-rate mortgage
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10% down payment if you’re buying a second home
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15% down payment for those purchasing a multi-unit property, as opposed to a single-family home
Using a mortgage calculator allows you to estimate your future monthly payments based on your down payment amount and interest rate.
EMPLOYMENT AND INCOME REQUIREMENTS
In the mortgage preapproval process, home buyers are required to submit proof of income. This may include some or all of the following documents:
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30 day’s pay stubs
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2 year’s W2s
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2 year’s tax returns if self-employed
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2 year’s bank statements
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An offer letter, if you’ve not yet started a new job
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Proof of education for new graduates
Alimony may be considered if it is documented in the divorce decree, including the method of payment, like an automatic deposit. Seasonal income is also permissible when supported by evidence in a tax return.
DEBT-TO-INCOME RATIO
The buyer's debt-to-income ratio (DTI) is for qualifying for a conventional loan. It compares total monthly debts, including mortgage payments, to gross monthly income. Lenders use DTI to evaluate mortgage affordability. To calculate your DTI, sum your loan payments, including:
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Student loans
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Personal loans
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Car loans
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Credit card minimum payments
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Your projected mortgage payment
Most lenders prefer this ratio to 36% or lower of the borrower’s income., conventional loans might permit a debt-to-income (DTI) ratio as high as 49%. Be sure to include any monthly child support or alimony payments you are obligated make. Finally, divide that total by your gross monthly income.
PROPERTY REQUIREMENTS
A lender won't approve a mortgage above the property's value. Before closing, the lender appraises the home to determine its market value. For example, if a buyer to pay $400,000 but the appraisal is $380,000, this will impact the loan.
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In this case, the home buyer should use this appraisal as a bargaining chip to get the seller to lower the price to a level the lender will finance
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Or, the buyer could pay the additional $20,000 out of pocket to compensate for the lower borrowing limit. This $20,000 would be added to the down payment you’d already agreed to pay
When obtaining a conventional loan appraisal, it's important to more than just the property value. During a home inspection, the appraiser seek the input of another professional.
Conventional loans have relaxed appraisal and property standards compared to FHA, VA, or USDA loans, allowing to qualify for homes in poorer condition that you can repair after moving in.
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