With Wells Fargo, you may be eligible for a conventional fixed-rate mortgage with a down payment as low as 3%. These home loans may also be layered with gift funds and down payment assistance programs.
For a Wells Fargo mortgage, you'll need a minimum credit score of 600 (with a down payment of 3% or more) to qualify for a conventional loan under the yourFirst Mortgage program.
Conventional loans account for a large portion of purchases and refinances, and are available through different types of mortgage lenders, including banks, credit unions and online lenders. Government-insured loans, by comparison, are backed by a government institution.
Fannie Mae says that conventional loans typically require a minimum credit score of 620. But lenders can raise their own requirements. FICO® scores for conventional homebuyers averaged 757 in the first 11 months of 2020, according to mortgage software firm Ellie Mae®.
Conventional loan down payment requirements
The minimum down payment required for a conventional mortgage is 3%, but borrowers with lower credit scores or higher debt-to-income ratios may be required to put down more.
The mortgage approval process can take anywhere from 30 days to several months, depending on the status of the market and your personal circumstances.
Cons: Why a conventional mortgage may not be right for you
The eligibility requirements for conventional loans are more stringent than government-backed loans. Conforming loans are sold to Fannie Mae or Freddie Mac soon after being created to help keep mortgages affordable for homebuyers.
A conventional loan is often better if you have good or excellent credit because your mortgage rate and PMI costs will go down. But an FHA loan can be perfect if your credit score is in the high-500s or low-600s. For lower-credit borrowers, FHA is often the cheaper option.
Options for putting down less than 20 percent
Here are some common options: A conventional loan with private mortgage insurance (PMI). “Conventional” just means that the loan is not part of a specific government program. Typically, conventional loans require PMI when you put down less than 20 percent.
To qualify for a 3-percent-down conventional loan, you typically need a credit score of at least 620, a two-year employment history, steady income, and a debt-to-income ratio (DTI) below 43 percent. If you apply for the HomeReady or Home Possible loan, there are also income limits.
To get a conventional loan, you usually must pay at least 3% to 5% of the home's purchase price as a down payment. You'll also need a credit score of around 620 or higher, and the loan amount must follow conforming loan limits.
The baseline conforming loan limit for 2022 is $647,200 – up from $548,250 in 2021. The limit is higher in areas where the median house cost exceeds this number, so borrowers in high-cost areas can get conforming loans of up to $970,800 depending on the limit in their individual county.
They're also suitable for anyone who needs lower credit requirements to get a mortgage. A conventional loan is a great option if you have a solid credit score and little debt. You can avoid PMI by paying 20% of the loan upfront, which will lower your mortgage payments.
While Wells Fargo uses FICO® Score 9 for some credit decisions, there are many different credit scores available to consumers and lenders. FICO® Scores are the credit scores used by most lenders, but different lenders (such as auto lenders and credit card lenders) may use different versions of FICO® Scores.
The number of days from application to approval will vary for purchase and refinance home loans. The timeline is generally 30-90 days.
What credit score does Wells Fargo use? Wells Fargo uses FICO credit scores to decide whether borrowers qualify for mortgages. For most Wells Fargo mortgage programs, you need a FICO score of 620 or higher to qualify.
A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.
5% down payment
Borrowers with lower credit scores might be required to make a down payment of 5% or more to get a conventional loan, meaning they'd need to finance 95% of the home's value. This is sometimes referred to as a “5 down conventional loan” or a “conventional 95 mortgage.”
The Conventional Appraisal
Conventional appraisers base their valuation of a home's worth on three essential factors: location, condition and area comparables for similar houses. They'll also look for safety or health concerns in the home that would diminish the desirability of the home and thus reduce its value.
Sellers' Own Perceptions
Sellers often prefer conventional buyers because of their own financial views. Because a conventional loan typically requires higher credit and more money down, sellers often deem these reasons as a lower risk to default and traits of a trustworthy buyer.
Yes. To convert an FHA loan to a conventional loan you'll need to meet the conventional loan lending criteria and complete a mortgage refinance. You'll also need to provide documentation so the lender can verify your finances.
As a rule, most lenders require PMI for conventional mortgages with a down payment less than 20 percent. However, there are exceptions to the rule, so you should research your options if you want to avoid PMI.
Interest rates for FHA loans will be lower than a conventional loan when the borrower has a high credit score and a small down payment. With conventional loans, putting down just 5% will not only result in PMI, but there will be a rate add-on for the high loan to value ratio.
People with little cash for a down payment and a modest credit rating typically qualify for Federal Housing Administration (FHA) mortgages. FHA loans require a lower minimum down payment and lower credit scores than conventional loans. FHA loans are backed by the government, unlike conventional loans.