Anyone who has ever applied for a mortgage knows there are minimum requirements they must meet to qualify. And while we’d love to help any and everyone who walks through our door, those guidelines are standard and specific, and lenders can’t bend them or make exceptions. In fact, conventional loan guidelines are in place to protect both the lender and the borrower.
For lenders, the guidelines help to prevent them from approving loans that are too high risk. For borrowers, the guidelines help to prevent you from taking on a loan you can’t realistically pay back.
Since we primarily work with conventional loans here at Mortgage Specialists, keep reading to learn what is required to qualify.
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Conventional Loan Guidelines
Conventional loans are a little harder to qualify for than their government-insured counterparts like FHA and VA loans. To qualify, you need a minimum credit score of 620. And while that’s the minimum, keep in mind that with a higher credit score, you can obtain a more favorable interest rate. You will also need proof of steady employment for the past two years and generally a debt-to-income ratio of 43% or less.
A down payment of at least 3% is required. If you plan to put less than 20% down, expect to pay for private mortgage insurance (PMI). Your PMI fees can add up to .15-1.95% of your loan balance each year.
As we touched on above, these are the minimum requirements. If you take the time to raise your credit score, pay down debt, or save money for a larger down payment prior to purchasing, you will likely qualify for a much better interest rate. And trust us, you want a better interest rate – it can save you tens of thousands of dollars over the life of your loan.
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If you’re thinking about buying a home in the next year or two, we encourage you to reach out to us now. Then, we can run your information to see what you could apply for now, and work with you to make sure you’ll be able to get the loan you want when you’re ready to buy. Give us a call at 402-991-5153 to set up an appointment today.
Ready to start the mortgage process? Our online application takes anywhere from 5-20 minutes to complete and we can have you pre-approved for a loan in just a few hours.