Most homebuyers today are reliant on the availability of mortgages to purchase a property in the U.S. For years, homebuyers were required to place a minimum of 5% down on a conventional loan. However, the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) recently changed requirements where some home loans now offer 97% financing. This change now allows buyers to put down as little as 3% to purchase a property, making it even easier to buy a home in the U.S.
- First-time homebuyers who are currently considering their loan options may want to consider a conventional mortgage, as they are an excellent fit for many reasons. Continue reading for a brief overview of convention mortgages and the role they play in the housing market today.
Conventional mortgage defined:
A conventional mortgage refers to a home loan in which is not secured by a federal government entity like the FHA, VA, USDA. However, is available through a private lender such as credit unions, banks, or mortgage companies. Fannie Mae and Freddie Mac are the two government-sponsored enterprises that can guarantee these types of mortgages.
What documentation do you need?
In order to obtain a conventional mortgage, a homebuyer needs a variety of documents which includes (and is not limited to):
Proof of income- pay stubs and federal tax returns
Employment Verification- pay stubs (may also contact the employer to verify employment and salary)
Assets- bank and account statements
Other- social security number, driver’s license or state ID card
Credit scores required for conventional home loans
While credit score requirements vary from every lender, 620 is generally the score a buyer needs to obtain a conventional loan. If you are looking to receive the best possible rates, you should strive for a credit score in the mid 700s.
