In most cases, conventional loans require a credit score of 580 or higher. Lenders also look for excessive debt or certain negative events on your credit report, such as a bankruptcy or missed payments—which may make it harder for you to qualify for a conventional loan.
A lot of first-time homebuyers think they need a 20% down payment to qualify for a conventional loan. That's simply not true. Conventional loan down payment requirements are as low as 3%. That's only $9,000 down for a $300,000 home, or $6,000 down for a $200,000 home.
Structural Issues
If the appraiser notices problems with the foundation, roof, or load-bearing walls, these issues can lead to a failed appraisal. Common structural problems include: Foundation Cracks: Large or significant cracks in the foundation can indicate serious underlying issues.
There are no specific income limits for most traditional mortgage loans, such as conventional loans or FHA loans. Lenders typically focus on your income to qualify for a mortgage by looking at factors like your debt-to-income (DTI) ratio, credit score, and overall financial stability.
To comfortably afford a $200,000 house, you'll likely need an annual income between $50,000 to $65,000, depending on your specific financial situation and the terms of your mortgage. Remember, just because you can qualify for a loan doesn't mean you should stretch your budget to the maximum.
It isn't hard to get a conventional loan if you have a 620 credit score and 3% down payment. You can get an FHA loan with a lower score, but you need a slightly higher down payment (3.5%).
Forgoing a home inspection does not typically affect the approval of your conventional loan, as the loan is primarily based on your creditworthiness and the property's appraisal value. However, it could impact your future financial situation if significant property issues are discovered later.
Here's how it breaks down. Federal Housing Administration loans: 14.4% denial rate. Jumbo loans: 17.8% denial rate. Conventional conforming loans: 7.6% denial rate.
The process can take from several days to a week. Conventional loan appraisals have a slightly longer timeline, and vary based on factors such as property complexity, location, and the workload of the chosen appraiser. On average, conventional loan appraisals may take around two to four weeks.
The main disadvantage of a conventional loan is the requirement for a down payment, which can be quite large depending on the loan amount and the borrower's financial situation. Additionally, borrowers need to show that they have assets that can be used to pay off the loan as well as reserves in case of a hardship.
Most other loans require an initial payment of about 5%, but you can expect to put down up to 20% with a conventional loan. The amount varies and depends on your credit history. You will also be responsible for origination fees, appraisal fees and mortgage insurance.
Reasons your mortgage application may be denied include a dip in your credit score, increased debt, paperwork errors, a low home appraisal and unverified cash deposits.
The new loan limit for most of the country will be $806,500 — a 5.21% increase over the 2024 limit — and is effective for whole loans delivered to Fannie Mae and loans in MBS pools with issue dates on or after Jan. 1, 2025.
As such, many first-time home buyers find that an FHA loan is easier for them to obtain. Conventional loan lenders often require higher credit scores and higher debt-to-income ratios from their borrowers – making them pricier options for many buyers who may not meet those qualifications.
Conventional Loan Minimum Credit Score
In most cases, you'll need a credit score of at least 620 to qualify for a conventional loan. When you apply, your lender will check your credit history to determine if you have qualifying credit. If you don't, you might not get approved for the loan.
Can My Security Deposit Be Returned If My Mortgage Is Denied At Closing? If you have a contingency in place that includes an offer and purchase contract, you may be able to get your earnest money back. However, if you don't have it, you could lose it.
From application to approval and closing, getting a mortgage can take anywhere from 30 days to 60 days. However, some home purchases can take longer, depending on factors unique to the purchase transaction and the home loan processing time.
In California, home appraisals are usually required for conventional mortgage loans, especially in purchase scenarios. The appraiser's report gives the mortgage lender better insight into the actual market value of the home.
Neither a new home nor an existing home has to have appliances to be eligible. How cool is that! FYI, some lenders do have overlays. BUT, if an appliance which is identified as refrigerators, ranges/ovens, dishwashers, disposals, microwaves and washers and dryers are present they MUST be operational.
Exterior: This includes the roof, siding, foundation, windows, doors, and landscaping. Interior: The inspector will assess the condition of walls, ceilings, floors, stairs, and other internal structures. Plumbing: Pipes will be inspected for leaks, water pressure, drainage, and functionality.
A lower credit score means more risk for your lender. Because of that, they'll charge you more to cover that risk, especially since a conventional loan doesn't have a government agency as a safety net. Once your score dips below 680, you could find that government-backed options offer more competitive rates.
Lender's Discretion
Home Inspections: While conventional loans don't require home inspections, some lenders might suggest or require one if the appraisal highlights potential concerns about the property's condition.
Conventional loans often require a higher down payment compared to FHA loans. In 2024, borrowers typically need to put down at least 20% of the purchase price, depending on the lender's requirements and the borrower's financial profile, including the loan amount and type of home loan they are applying for.