Who it fits
Borrowers with solid credit, a stable income history and at least a small down payment. Conventional loans follow guidelines set by Fannie Mae and Freddie Mac, and loans within the annual conforming limit get the most competitive pricing.
Down payment and mortgage insurance
Some programs allow as little as 3% down for first-time buyers. With less than 20% down you'll pay private mortgage insurance (PMI), which you can ask to remove once you reach 20% equity and which drops off automatically at 22% on a normal payment schedule.
What lenders look at
- Credit score, usually 620 or higher
- Debt-to-income ratio
- Two years of income history
- Cash for the down payment, closing costs and reserves
Questions
Can I use a conventional loan for a second home or rental?
Yes. Second homes and investment properties qualify, usually with a larger down payment and slightly higher pricing than a primary residence.
Is PMI permanent?
No. On a conventional loan you can request cancellation at 20% equity, and it ends automatically at 22% based on the original schedule.