Conventional Loans

A Conventional or Conforming Loan is a loan program overseen by Fannie Mae or Freddie Mac. Fannie and Freddie have more restrictions than FHA or VA.

Conforming loan programs have many advantages and disadvantages:

Higher down payments (normally 5% of your purchase price)
Allows sellers to pay up to 3% of the borrowers closing costs
Strict credit requirements
Lower interest rates than FHA and VA Loans

Despite the many perks of a Conforming loan, there may be guidelines or stipulations that would not fit your need or you may not qualify for.

Borrower Eligibility

All eligible borrowers are required to have a social security number and be of legal age (at least 18 years of age). You must be a U.S. citizen, Permanent or Non-Permanent Alien Residents.

Credit Requirements

A credit score of is required when using Fannie or Freddie. More recently, limitations have been added for buyers with previous bankruptcies, foreclosures and pre-foreclosures, judgments, collections and charge-offs. If any of these situations apply to you, your file will be considered on case-by-case basis.

Down Payment Requirement

Securing a mortgage for your home often requires a down payment. If you choose to go with Fannie and Freddie, they require 5% of the sales price for a down payment. They also require that you pay this amount from your own funds, as well as provide paperwork to show that the sum has been in your account for at least 3 months.

Reserve Requirements

Fannie and Freddie both require the buyer to have 2 months of reserves in a bank account, even after closing costs and your down payment have been paid. They want to ensure that if something were to happen (loss of job, accident, etc.) you would have at least 2 months worth of mortgage payments to sustain you during your ordeal.