Conventional loans are offered through private lenders such as mortgage companies or banks, rather than through a government entity. These types of loans generally have fixed interest rates, meaning the interest rate will not change throughout the duration of the loan. Since these loans are not offered by government entities, lending requirements set by private lenders are often more strict.
Documentation Required For Conventional Loans
When applying for a conventional loan, private lenders want to ensure the applicant is able to afford the monthly payments by checking their assets and liabilities. In addition to being able to make monthly payments, lenders also want to check assets and liabilities to ensure the applicant is able to pay up front costs such as down payments, underwriting costs, settlement fees and closing costs. In order to be approved for a conventional loan, the applicant must be able to provide the following documentation.
Proof Of Income
In order for applicants to show their proof of income, they must be able to provide the lender the following documentation.
- Pay Stubs (Up To 30 Days Or More) & A Year To Date Income
- Minimum Of 2 Years Of W-2 Statements
- Minimum Of 2 Years Of Federal Tax Returns
- Statement Of 60 Days Or More Of All Asset Accounts (Checking, Savings & Investment Accounts)
Verification Of Employment
To qualify for a conventional loan, applicants must also be able to verify their employment status. Private lenders want to ensure the applicant has a solid history of employment by requiring that the applicant provide pay stubs and may also contact their employer to confirm their employment and current salary. For applicants who have recently changed employers, lenders may also contact previous employers to ensure employment stability.
Identification & Credit Verification
Private lenders require that all applicants provide a government issued ID (drivers license or state issued ID), their social security number and signature. This documentation allows lenders to pull the applicants credit history and credit report.
Who Can Qualify For A Conventional Mortgage?
Due to the strict requirements set forth by a conventional loan, applicants must be able to match the following qualifications.
Credit Score Qualifications
For those wishing to apply for a conventional loan, applicants should have a credit score no lower than 680 and in some cases a credit score of at least 700. The higher the applicant’s credit score, the lower the interest rate of the loan will be. Traditionally, applicants with credit scores over 740 are able to obtain the greatest interest rates.
A debt-to-income ratio or DTI, is a calculation of the applicants current monthly debts including credit cards and loan payments compared to their monthly income. In most cases, an ideal debt-to-income ratio should be close to 36% and no more than 43%.
To qualify for a conventional loan, applicants must be able to put a down payment of at least 20% of the loan. If applicants are unable to do so, some lenders will still allow the applicant to qualify, if they take out private mortgage insurance or PMI and pay those monthly premiums until they have reached at least 20% equity in the house.
Speak To The Experienced Mortgage Brokers Today
The experienced mortgage brokers at MyLendingPal have years of experience working with and providing qualified applicants with conventional loans. For more information about conventional loans or to start the application process, give us a call at 833.379.0797 or apply online today.