Conventional Loan Questions: What You Need to Know

Read these conventional loan questions and be informed.

The following are some of the most commonly asked questions about conventional loans:

Very nice homeQ. What is the minimum down payment for a conventional loan?
A. A conventional loan is the most common type of mortgage. The minimum down payment for a Conventional 97 loan and HomeReady loan is 3%.

The minimum down payment for a conventional loan is 5%, for the standard conventional/conforming loan.

Q. What types of properties can I purchase with a conventional loan?
A. Conventional mortgages can be used to purchase a single family home, 1 – 4 unit primary property, investment property (1 – 4 units), second home.

Q. Can I use my 401(k) or IRA as collateral for a down payment on my house with a conventional loan?

Q. Are jumbo loan rates higher?
A. Interest rates on jumbo loans usually exceed. rates on conventional loans below the local lending. limit. Because the lender could not market the loan to Freddie or Fannie because of the loan over lending limit.

Q. Can closing costs be included in a conventional loan?
A. Although closing costs cannot be included in traditional finance for conventional loans, seller and lender concessions might help alleviate the cash requirement at settlement.

In most states of the country, conventional loans that include gift monies allow for the inclusion of all or most closing costs. conventional refinancing loans allow for the inclusion of all or all closing costs.

Q. Can you get down payment assistance with a conventional loan?
A. Down payment assistance is available most of the time in a number of states and counties. The grant/loan is normally provided through state and county agencies and non-profit organizations.

Some first time homebuyers are selected for financing, based on their credit, down payment and closing costs Conventional loans are typically part of these programs. A good . starting point is . . HUD's Local Home buying Programs.

Q. Do conventional loans require pmi?
A. Yes, if the down payment is less than 20%. PMI will be required on the conventional loan (private mortgage insurance).

Q. Do you need 2 years of work history to get a mortgage?
A. For Fannie Mae and Freddie Mac, private corporations, for a two-year job history is gold. However, just because a lender has a 2 year job history, it is no indication that they will look favorably on your application.

You should have a "minimum length of two years of job income" and this comment is buried in Fannie Mae guidelines. The majority of loan offers send their application to their automated underwriting system. Illness (e.g. the flu), school and a short absence of employment may .

Q. How much down for a conventional loan?
A. Conventional loans require a 5% down payment, unless the applicant can meet the guidelines of the Conventional 97 or HomeReady loan programs. These two mortgages only require a 3% down payment.

Q. How much down for a conventional loan?
A. Conventional loans require a 5% down payment, unless the applicant can meet the guidelines of the Conventional 97 or HomeReady loan programs offered by Fannie Mae. Freddie Mac offers similar loan programs. Three percent down payment is all that is required for these mortgages.

Q. Is a termite inspection required for a conventional loan?
A. A termite inspection is usually not required, however, the lender may insist on a termite inspection. The appraiser can also recommend a termite inspection.

Q. Minimum down payment for a conventional loan.
A. Fannie Mae and Freddie Mac, two public companies that purchase mortgage offer down payment programs with on 3% down. See HomeReady and Conventional 97 loan.

Q. On a conventional loan, how much does private mortgage insurance cost?
A. Private mortgage insurance (PMI) premiums are determined by the kind of mortgage (fixed rate or adjustable rate), the down payment (loan to value), the credit score, and numerous rate modifications (i.e. second home, employee relocation, manufactured homes etc.).

Calculating a PMI rate requires virtually a supercomputer. The following is a link to the MGIC rate card for monthly borrower-paid PMI rates. Borrower-Paid Monthly Premiums. Additional information can be found on the Private mortgage insurance page.

Q. What is an APR rate on mortgages?
A. The Truth in Lending Act (TILA) of 1968 is a law that was enacted to encourage informed consumer credit usage by mandating disclosures about its terms and charges and standardizing the way borrowing expenses are calculated and published.

APR (annual percentage rate) calculations and disclosure are mandated by the Truth in Lending Act (as administered by the Consumer Financial Protection Bureau (CFPB) under Regulation Z of the Act).

The annual percentage rate (APR) is not the interest rate on the credit transaction, but rather a method of comparing lenders by factoring in fees and discount points. The APR calculation was created to assist customers in comparing loans.

Q. What is the credit score needed for a conventional loan?
A. The ideal credit score for manually underwritten loans (evaluated by a human being) is 620 for a fixed rate loan. A credit score of 640 is required for an adjustable rate loan.

While Fannie Mae and Freddie Mac value credit ratings, according to Fannie Mae, credit scores are not a component of computer generated assessment. Fannie Mae has begun averaging credit scores for several borrowers.


In conclusion, there are many questions that arise when considering a conventional loan. It is important to have a clear understanding of the terms and conditions of the loan before making a decision. By asking the right questions, you can make an informed choice about whether a conventional loan is the best option for you.