Do You Qualify for a Conventional Mortgage? Key Requirements Explained

If you’re thinking about buying a house, you’ve likely come across conventional mortgages and may be wondering if you qualify for this popular home loan. We’re here to help you understand your options and answer any questions you may have so you can apply with confidence.

Here, we break down what a conventional mortgage is, how it compares to government-backed loans, and what the key qualifications for a conventional mortgage loan are.

What’s a Conventional Mortgage?

A conventional mortgage is a home loan that is not insured or guaranteed by the federal government. Unlike a VA, FHA, or USDA loan, a conventional mortgage is funded and backed by private lenders.

Because they’re not government-backed, lenders typically require stronger financials than other types of loans. That said, they can also offer more flexibility, especially for borrowers with stable income and high credit scores.

Credit Score Requirements

Lenders can set their own conventional mortgage requirements, but when it comes to credit scores, most look for a minimum of 620. The higher your score, the better your chances of approval–and the more favorable your interest rate may be.

When preparing to buy a house, pay close attention to your credit score and don’t make major financial purchases that could negatively impact it.

Down Payment Minimums

One of the biggest reasons borrowers are drawn to conventional mortgages is the wide range of down payment options. If you’re a first-time buyer with strong credit and a healthy financial history, you may qualify for as little as 3% down, making homeownership that much more affordable.

On the flip side, if you’re able to put 20%, you could avoid private mortgage insurance (PMI), which can lower your monthly payments. But those aren’t your only options. Here at JustChoice Lending, we’ll help you find the loan and down payment that works best for your financial situation.

Debt-to-Income (DTI)

Lenders don’t just look at your credit score or down payment–they also consider your debt-to-income ratio, which compares your monthly debt payments (such as a credit card) to your gross monthly income (before taxes or other deductions). Why? A lender wants to make sure you can comfortably afford your monthly payments, as that generally indicates you’re less likely to default on your loan.

For conventional loans, most lenders prefer a DTI of 43% or lower, though some may allow up to 50%, depending on other factors. Connect with our home loan experts to explore options that comfortably fit in your budget so you aren’t stretched financially.

Property Requirements

To qualify for a conventional mortgage, the property you plan to purchase must be used as either a primary residence, a second home, or an investment property. It’ll also need to pass conventional mortgage appraisal guidelines and meet minimum safety and liveability criteria.

Documentation

Thinking about applying? You’ll need to gather a few key documents, including:

• Tax returns
• W-2s
• Proof of income
• Employment verification
• Bank statements

Preparing these documents ahead of time could help speed up the application and processing timeline.

Conventional vs. Government-Backed Loans: Which Is Right for You?

If you have a strong credit score, have saved for a down payment, and have a typical stream of income, such as a full-time W-2 job, you’d likely meet conventional mortgage guidelines. Therefore, it could be a good option for you.

On the other hand, if you’re still working on building up your credit, are interested in lower down payment options, and have a more unique financial situation, a government-backed mortgage, like an FHA loan, could be the better option.

Together, We’ll Find the Right Loan for You

Here at JustChoice Lending, we believe everyone deserves access to affordable housing and a wide range of loan options. Whether you’re interested in applying for a conventional mortgage or would like to explore a different route, our mortgage professionals are here to help. Connect with us to start your home loan journey today.