How Conventional Financing Works
Conventional loans represent a major part of residential mortgage lending.
Conforming conventional mortgages generally follow applicable Fannie Mae or Freddie Mac guidelines and loan limits.
Qualification evaluates income, assets, liabilities, credit and property characteristics, frequently with the assistance of automated underwriting systems.
Down Payment Options
The common belief that conventional financing always requires 20% down is incorrect.
Eligible borrowers may have access to lower-down-payment structures depending on the transaction and applicable guidelines.
Putting less than 20% down may result in private mortgage insurance, but that does not necessarily make the structure undesirable. Preserving cash can sometimes be financially valuable.
Credit, Income and Assets Work Together
There is no single credit score or income number that independently determines conventional approval.
Automated underwriting evaluates the complete risk profile, including credit, debt-to-income, loan-to-value, reserves and other factors.
This is why two borrowers with the same income or credit score can receive different underwriting results.
Conventional Financing for Different Occupancies
Conventional programs can finance qualifying primary residences, second homes and investment properties.
However, down payment, pricing and underwriting requirements can change significantly with occupancy.
Correctly establishing the property's intended use is therefore important.
When Conventional Is Not the Best Fit
Conventional financing can provide excellent terms, but it is not appropriate for every borrower.
Self-employed income, complex financial circumstances, property characteristics or other issues may make jumbo, bank statement or Non-QM financing more appropriate.
We compare alternatives rather than forcing every transaction into conventional guidelines.