Requirements of a Conventional Home Loan

Certain loan programs are a good fit for certain borrowers, so it’s important to understand your lending options when shopping for a mortgage. Conventional loans can be a great fit with the qualifying requirements.

UNDERSTANDING THE CONVENTIONAL LOAN

What is a Conventional Loan?

A conventional mortgage is a loan that meets the lending requirements set by Fannie Mae and Freddie Mac. These entities don’t make loans, but rather they guarantee loans on the secondary market. They purchase many of the mortgages created in the United States.

Once you receive a mortgage from a bank or mortgage company, your lender will likely sell the loan on the secondary market. By selling off mortgages, banks and mortgage companies maintain enough cash to create new loans. Fannie Mae and Freddie Mac will only purchase conventional loans that meet their lending requirements.

Flexible Credit

Credit requirements are lower on FHA loans. See if you qualify today.

Loan Limits on a Conventional Mortgage

Conventional loans are either conforming or non-conforming. Conforming loans are mortgages that don’t exceed the financing limit set by the Federal Housing Finance Agency (FHFA). Conforming loans are backed by Fannie Mae and Freddie Mac. For 2020, the conforming loan limit is $510,400. In high-cost areas, the conforming loan limit is $765,600.

If you want to purchase a property that exceeds the conforming loan limit for your area, you will need a non-conforming mortgage or a jumbo loan. Loan limits for a jumbo loan vary from lender to lender. These mortgages are larger in size and riskier, so they typically have higher down payment requirements, stricter credit requirements and higher interest rates.

Start Your Conventional Loan

Find a loan expert near you to start your home loan journey. Our licensed team of loan officers can help guide you through your homeownership path from start to finish.