Are you looking into real estate loans and are wondering what the requirements are? Here we will take a look at conventional loans.
Conventional loans are one of the most popular types of mortgages: almost all lenders offer them. In August 2020, 82% of all closed mortgages were conventional loans, according to a report by Ellie Mae, making them far more popular than FHA, VA, or other home loans.
Conventional loans tend to have stricter requirements than government-backed mortgages. But with so many homeowners meeting these requirements, a conventional loan might be more accessible than you think. A conventional mortgage is a home loan not backed by a government agency such as the FHA, VA, or USDA.
Lenders often sell conventional loans to Fannie Mae or Freddie Mac, which are government-sponsored enterprises (GSEs) that help make mortgage financing available.
As a borrower, these are the minimum conventional loan requirements you should be prepared to meet:
Credit score of at least 620
Debt-to-income ratio of no more than 45%
Minimum down payment of 3%, or 20% with no PMI
Property appraisal verifying the home’s value and condition