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Conventional Home Loan Financing

Conventional Mortgages

Conventional home loans make up a large part of most of the mortgages used to buy or refinance a home.  There is a common misunderstanding that you need a 20% down payment to use a Conventional home loan to purchase a home.  The truth is, Conventional programs offer as little as 3% down payment.

When we talk about Conventional loans, we are talking about underwriting guidelines from Fannie Mae and Freddie Mac.  The underwriting standards offered by these two options makes mortgages easier to qualify for, at a very reasonable cost.

Fannie Mae provides the underwriting guidelines for most conventional mortgages through it's automated underwriting engine called Desktop Underwriter, or DU.

Freddie Mac offers conventional mortgages with mostly similar guidelines to Fannie Mae except for slight differences.  Some of the advantages of using Freddie Mac conventional financing is the ability to use co-mortgagers to qualify (similar to FHA), and the option to use 1 year income verification in some cases.

Conventional Borrower Requirements

  • Owner and Non-Owner Occupied loans allowed
  • 620 Min. Credit Score
  • Income verification required - W2 or tax returns
  • Self Employed must provide 2 years tax returns - All schedules
  • Affordable Housing programs offer as low as 3% down payment
  • 5% minimum down payment for loans up to $453,100
  • 5% down payment for high cost area loans as high as $679.650
  • Approved buyer assistance can be used up to 100% combined loan to value
  • 45% to 50% Debt to Income (DTI) ratio / 50% DTI allowed with compensating factors

Loan Terms

  • 30 Year Fixed
  • 20 Year Fixed
  • 15 Year Fixed
  • 10 Year Fixed
  • 5/1 | 7/1 | 10/1 ARM – Adjustable Rate Mortgage
  • Choose your own term - many lender allow you to choose your own term
  • Private Mortgage Insurance (PMI) required for loans above 80% loan to value
  • Lender paid mortgage insurance (LPMI) available - PMI alternative

Property Requirements

Properties eligible for Conventional financing include:

  • 1 family residence – single family residence (SFR)
  • 2 family residence – duplex (owner must occupy one unit)
  • 3 family residence – triplex (owner must occupy one unit)
  • 4 family residence – fourplex (owner must occupy one unit)
  • Single family Condominium – with HOA approval
  • Single family Townhouse – with HOA approval

Loan Limits

Conventional loans offer Standard Balance and High Balance financing options.  You can view California Conforming Loan Limits Here.

Waiting Periods after Credit Hardship

  • 4 Years from Discharge of Chapter 7 Bankruptcy
  • 4 Years from the Dismissal of a Chapter 13 Bankruptcy
  • 2 Years from Discharge of Chapter 13 Bankruptcy
  • 7 Years from Foreclosure*
  • 4 Years from Short Sale or Deed in Lieu of Foreclosure*

* If your mortgage was discharged in a Bankruptcy, and a foreclosure, short sale, or deed in lieu of foreclosure occurs AFTER the discharge, the lender may use the BK discharge waiting period and disregard any convwaiting period from the subsequent hardship.