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Conventional Loan

What is a Conventional Loan?

A conventional loan is a commonly offered, flexible mortgage type suitable for a wide range of borrowers and properties. They typically have a fixed rate of interest, allows for greater control over mortgage insurance, has no program-specific fees, and more choices in rates and term amounts. With higher credit scores, down payments can be as low as 3%. Conventional loans do not need private mortgage insurance.


Types of Conventional Loan

There are two types of conventional loans, a conforming loan and a nonconforming loan. Conforming loans adhere to government guidelines for the size of loan, capping the amount according to the number of units and location. In New York City, the conforming loan limit is $970,800.00 for a one unit property.


A non-conforming loan is for borrowers who need jumbo mortgages, or loans of amounts more than the conforming loan limit. Reasons can range from poor credit, high debt, or homes with high loan-to-value ratio.



However, it is also a loan with stricter requirements. Lenders of conventional loans are not backed by government agencies and so are unprotected if a borrower does not make payments, thus a riskier option for lenders. In order to qualify for a conventional loan, borrowers usually must have the following:

  • Proof of income

  • Assets

  • Employment Verification

  • A credit score of at least 620

  • Down payment of at least 20%

  • Debt-to-Income ratio of at most 36%

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