Conventional Loan Requirements 2019 & 2020

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hey this is Kyle with Kyle Seagraves

calm today we're talking about

conventional loan requirements so what

do you need to get a conventional loan

and a couple other videos I've talked

about conventional versus FHA as well as

some of the FHA requirements today we're

going to talk about conventional

requirements so what downpayment do you

need what credit score do you need what

does your income need to look like and

what are some qualifications that the

property you're looking to buy it needs

to have so right up front one of the

biggest things that people ask is what's

the down payment that I need so the down

payment to get a conventional loan

there's kind of two answers mainly the

main guideline that you're going to see

with conventional loans minimum

downpayment is usually 5% down okay

conventional can go down to 3% but

there's a couple more stipulations in

there and those are one of two things

either number one you need to be a

first-time homebuyer or at least one

person on your loan needs to be a

first-time homebuyer to get 3% down or

you can qualify for the home ready or

the home possible loans but those have

an income limit that have actually just

recently been shrunk by Fannie Mae and

Freddie Mac so it's kind of a long

answer to say what's the minimum down

payment I would expect or you should

expect 5% down but it can go down to 3%

again if someone on the loan is a

first-time homebuyer or if you can

qualify for the home ready or home

possible programs keep in mind that the

home ready and home possible programs do

have income limits though that can be

difficult to qualify for so one little

you know strategy in there is maybe you

aren't a first-time homebuyer but let's

say someone like your spouse is or a

co-borrower might be you can use that to

your advantage to add somebody else on

the loan as a co borrower to take you

from that 5% down requirement down to a

3% requirement by just bringing on one

person on the loan who's a first-time

homebuyer to qualify for the 3% so it's

a little trick in there you know it

might not work out because it's it's

difficult sometimes to get people to

cope borrow with you unless they're a

spouse but having that first-time

homebuyer in

does help you bring down your down

payment now the mortgage insurance

requirements for conventional loans are

that if you're putting less than 20%

down you're going to be required to

carry monthly mortgage insurance so the

minute you hit 20% equity in your

property you can get mortgage insurance

taken off but mortgage insurance is

there to protect the lender in the event

of a default so it doesn't help you at

all so conventional does let you you

know give you that lower down payment

that 5% or even 3% but you're going to

make up for you know that an opportunity

cost with paying some mortgage insurance

and it can be a mortgage insurance can

be all over the place depending on your

credit score and that mortgage insurance

cost is going to depend on how risky the

loan is so things like FHA loans those

have a fixed mortgage insurance no

matter if you know what your credit

score is your mortgage insurance is

always going to be a specific percentage

of the loan whereas conventional it's

all risk based so that means that if you

have a lower credit score on

conventional you're going to pay a lot

more in mortgage insurance than somebody

with a higher credit score so that

brings us to credit score what's the

credit score requirement on conventional

for most lenders it's going to be 620

you need a 620 to get a conventional

loan now what I've found is that if you

have a 620 even up to you know high

sixes conventional loan might not be the

best for you in terms of the rates

conventional loans are loans that are

best suited for higher credit scores

lower that's income ratio and higher

downpayment buyers and so if you have a

credit score within the range of 620

even up to $6.99 conventional might not

have the best rate for you but if you

get past that 700 credit score marking

above conventional might start showing

you better rates and giving you better

terms than another government loan

also with conventional loans they can be

a lot tighter on their restrictions and

credit qualifications so number one your

debt to income ratio is going to be a

lot tighter so debt to income ratio just

means how much monthly debt do you have

monthly debt obligation so what are your

credit card payments your auto payments

your house payment take all of that

divided by your income and that gives

you your debt to income ratio FHA is

going to allow you to go up to maybe

like a 56% debt income ratio

conventional they're gonna lower that

I've never seen it go above 49% and a

lot of times it's going to be even lower

than that based on some other risk

factors in the loan so if you have a lot

of debt that you're caring or maybe a

lower income conventional might be

trickier to qualify for because they

want to see a lot more room in leftover

income at the end of the month then

other loan programs will also some

requirements for conventional loans are

if you've had any credit event in the

past you're gonna have to wait a lot

longer to get a conventional loan than

you would a government loan so for

instance if you've had a bankruptcy

you're going to have to wait a longer

period of time on the conventional side

than you would on a loan like FHA that's

more forgiving on things like bankruptcy

and collections on conventional side

you're gonna have to be mindful and ask

your mortgage advisor how your

bankruptcy or foreclosure sheriff's sale

collections any missed payments on your

credit report what those are going to do

to your conventional loan because

conventional can be a lot tighter on

some of their restrictions there also

with conventional loans we run into some

property restrictions in terms of you

know you're going to get an appraisal on

the property

conventional really is pretty light

compared to a lot of other loans FHA

loans are really strict on their their

appraisal standards FHA loans almost

want you to kind of have a move-in-ready

house like they don't want any health or

safety issues conventional is also

concerned with health and safety but not

as much as FHA conventional loans you

can use to buy a foreclosed property you

can use it to buy property

that need to be fixed up it still needs

to be habitable so keep that in mind

with a conventional loan you still it

still needs to be a habitable home

it can't be so far gone to the point of

disrepair that you wouldn't be able to

move into the property but conventional

loans are a lot more forgiving in terms

of some of the the property restrictions

also conventional loans as far as

employment are going to want to see

consistent employment they want to see

consistent employment over a period of

two years as long as well as I

consistent income or increasing income

so if you've had job losses or gaps in

employment talk to your mortgage advisor

and find out how long those gaps are if

they need to be explained and a little

bit of how to document some of your

employment situation just because

conventional is is concerned about the

quality of the buyers that they they

want in their loan programs and so they

want employment to be consistent income

to be consistent as well as assets so

what do you have in the bank account

they normally want to see two months of

your bank statements and mainly what

they're looking for there is one do you

have the funds to close on the property

are the funds not borrowed so they don't

want you to get any sort of loan for for

the down payment and then are there any

large deposits that they need to look

out for things like money laundering or

any sort of fraudulent activity going on

in the bank statements so conventional

loans are going to want to look pretty

closely add a lot of the employment

income and asset factors on your loan as

well overall conventional loans are

fantastic if you're well qualified as a

buyer Kim Mitchell is probably the best

route for you it's going to be the most

lacks in terms of the property

requirements and can give you really

great savings compared to other loans

that carry heavy mortgage insurance like

FHA and you know if you're putting 20%

down on a conventional loan you're never

going to have any mortgage insurance

which is just extra savings for you and

they really are fantastic

to get they can be a little bit more

difficult to qualify for than a

government loan but overall they're

fantastic the requirements are a little

bit steeper but they reward you in the

fact that you get more savings and less

hassle on the property so hey thanks so

much for watching this video if you have

additional questions feel free to leave

me a comment below my contact info is

also in the description if you'd like to

reach out I'd love to help you out

thanks so much for watching