A conventional loan is a loan that conforms to the loan guidelines set forth by Fannie Mae and Freddie Mac, the two government sponsored entities that buy most of these loans from lenders.
The current conventional loan limit is currently set at:
1 Unit – $453,100
2 Unit – $580,150
3 Unit – $701,250
4 unit – $871,450
Loans that fall into these loan limits are eligible for conventional loan financing.
Conventional loans are the most popular loans because typically carry the lowest interest rates. The lending guidelines for these loans has become standardized so most borrower’s with a credit score of at least 620 can qualify.
The minimum down payment requirement is 3%
The debt-to-income ratio can go up to 50% of the borrower’s gross monthly income
For those with good credit, private mortgage insurance (PMI) can cost lost then FHA mortgage insurance on loans with less than 20% down payment.
Properties eligible for financing include:
- Single family homes
- Planned Unit Developments (PUD’s) – typically detached homes with a homeowner’s association
- 2-4 unit multi-family properties
Borrower’s can receive gift funds from family members to assist with a portion or the entirety of the down payment.