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The minimum down payment for a conventional mortgage starts at 3%, but this can increase depending on the borrower's credit score, DTI ratio, and the type of property being purchased. Special programs like HomeReady and Home Possible cater to buyers with good credit but limited savings, allowing for lower down payments. However, putting down less than 20% usually means you'll need to pay for private mortgage insurance (PMI).
Conventional loan limits vary between conforming and nonconforming loans. Conforming loans adhere to limits set by the Federal Housing Finance Agency (FHFA), with a standard limit of $766,550 in most areas and up to $1,149,825 in high-cost regions for 2024. Nonconforming loans, which include jumbo loans, have limits set by the lender and often range between $1 million to $2 million based on the borrower's financial health.
Understanding these requirements and limits is crucial for anyone considering a conventional mortgage, as it helps in planning and preparing for the home buying process. Whether you're purchasing your first home, a second property, or an investment, a conventional loan offers a pathway with various options to suit different financial situations. Here are the key highlights:
Typically requires a credit score of at least 620, with better rates and terms available to those with scores of 740 or higher.
Minimum down payment starts at 3%. Higher credit scores may qualify for lower down payments, but less than 20% down usually requires PMI.
Conforms to FHFA limits, with a standard limit of $766,550 in most areas for 2024, and up to $1,149,825 in high-cost areas.
Preferred DTI below 36%, though some lenders may accept higher ratios under certain conditions.
Private Mortgage Insurance (PMI) is required for down payments less than 20%.
Suitable for primary residences, second homes, and investment properties.
Competitive rates, with potential for lower rates based on credit score and other factors.
Offers both fixed-rate and adjustable-rate mortgage (ARM) options.
Stricter borrower requirements compared to government-backed loans, making it challenging for those with past financial difficulties.
Programs like HomeReady and Home Possible cater to buyers with limited savings, offering lower down payment options.
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