What is a Conventional Mortgage?
A conventional mortgage refers to a loan that is not backed or insured by the federal government. Instead, these loans are offered by private lenders, including banks, credit unions, and mortgage companies.
Conventional mortgages typically feature a fixed interest rate, which means the rate remains constant for the duration of the loan. This provides homebuyers in Southwest Florida with a level of stability that is often absent with adjustable-rate mortgages. Generally, interest rates on conventional loans are lower than those for FHA loans but tend to be higher than those associated with VA loans.
Conforming conventional loans must adhere to the limits established by Fannie Mae and Freddie Mac. When a loan exceeds that threshold, it is classified as a jumbo (nonconforming) loan.
In most cases, borrowers can access larger loan amounts with a conventional loan compared to an FHA loan.
Prospective borrowers in Southwest Florida will need to fill out an official mortgage application (often along with an application fee) and provide their lender with the required documentation for a thorough assessment of their background, credit history, and current credit score.
Conventional Mortgage Requirements
Documentation Needed to Get a Conventional Mortgage
- Proof of income and assets.
- Employment verification.
- A driver’s license/state ID card.
- A valid social security number.
Other Requirements
- Have a FICO credit score of at least 620 (this number may vary from lender to lender).
- Make a down payment.
- Have a debt-to-income (DTI) ratio of less than 50%. This means that your total monthly debt payments can’t be more than 50% of your pretax income (includes debts that you aren’t actively paying).
- In the case of a conforming conventional loan, your loan must fall within the limits set by Fannie Mae and Freddie Mac.
Down Payment
The requirement for a down payment can vary based on your personal circumstances and the kind of loan or property you’re getting. First-time home buyers in Southwest Florida have the possibility of acquiring a conventional mortgage with a down payment as low as 3% through financial assistance programs.
- If you’re not a first-time home buyer, the down payment requirement is 5%.
- If you’re a second-time home buyer, the requirement is 10%.
- With an adjustable rate mortgage, you need to put down at least 5%.
- In the case of a jumbo loan, the down payment requirement ranges from 10% to 40%.
- If you’re not buying a single-family home, you may need to put down 15%.