Conventional Loans

At Timberline Mortgage, we want to make sure all of our customers have the information they need to make the best decision for their home buying experience. So if you’re looking at obtaining a conventional loan, here’s a few things to know.

Conventional loans are probably the most straightforward kind of loan you can get, mainly since they aren’t typically insured by government agencies like Housing and Urban Development (HUD) or Veterans Affairs (VA). That typically means that there are fewer hoops to jump through.

What Is Required?

There are three things that are required to qualify for a conventional loan:

Credit Score

As with any type of loan, your credit score plays a large role in what you qualify for and how much. What makes things slightly more complicated is which scoring model the lender will prefer to use, either FICO or Vantage. For right now, we’ll stick with the FICO model. 

When it comes to conventional loans, most lenders would consider potential borrowers at a FICO score of 650 or higher. There are some that may consider as low as a 620 score, but it is quite a bit tougher. Obviously, if you have a higher score, you’re more likely to get approved and have a lower interest rate.

Down Payment

When it comes to a conventional loan, many lenders would only require a down payment of at least 3% of the final cost of the home. While this doesn’t include closing costs, this is a number that can be determined using some simple math.

Say the home you’re looking at is about $300,000. If you have the agreed 3% down payment, then you would need to pay $9000 when you close. 

Debt-To-Income Ratio

This one is a bit more complicated to determine, particularly since it takes into account all of the debt you have. This not only includes credit cards and personal loans but student loans as well. So while it’s important to have some credit through loans and credit cards, it helps to get the payments on those as low as possible so you can qualify for a larger home loan.