Question 1

What credit score do I need for a conventional mortgage?

Accepted Answer

Most conventional loans require a minimum credit score of 620, but you will get better rates at 740 or above. Some lenders have overlays that push minimums to 640 or 660, so your actual options depend on the lender.

Question 2

How much down payment is required for a traditional mortgage?

Accepted Answer

You can put as little as 3% down on a conventional loan if you are a first-time buyer. The standard is 5% to 20%, and putting down 20% or more eliminates private mortgage insurance entirely.

Question 3

What is the difference between a conventional and FHA loan?

Accepted Answer

Conventional loans are not backed by the government, so they typically require higher credit scores but offer more flexibility on property types. FHA loans have lower credit requirements but come with mandatory mortgage insurance for the life of the loan.

Question 4

Can I get a conventional loan with student loan debt?

Accepted Answer

Yes. Lenders look at your debt-to-income ratio, not just the fact that you have student loans. If your monthly DTI stays under 45% to 50% with the new mortgage payment included, you can qualify.

Question 5

How long does it take to close a conventional mortgage?

Accepted Answer

Most conventional purchases close in 30 to 45 days from contract. Refinances can sometimes move faster since there is no seller involved. Delays usually come from appraisal scheduling or document collection.

Question 6

What are current conventional mortgage rates?

Accepted Answer

Rates change daily based on the bond market, your credit score, down payment, and loan amount. The best way to get an accurate rate is to reach out directly so I can pull pricing based on your specific situation.

Question 7

Is private mortgage insurance permanent on a conventional loan?

Accepted Answer

No. PMI on conventional loans drops off automatically when you reach 22% equity, or you can request removal at 20% equity. This is a major advantage over FHA loans where MIP stays for the life of the loan.

Question 8

Can I use gift funds for my down payment?

Accepted Answer

Conventional loans allow gift funds from family members for the entire down payment amount. You will need a gift letter and documentation showing the transfer. Some loan programs also accept gifts from employers or non-profits.

Question 9

What is the maximum loan amount for a conventional mortgage?

Accepted Answer

The 2024 conforming loan limit is $766,550 for most areas. High-cost areas like parts of California and Hawaii go up to $1,149,825. Anything above these limits falls into jumbo loan territory.

Question 10

Do I need reserves in the bank to qualify?

Accepted Answer

For a primary residence with a single unit, many conventional programs do not require reserves. Investment properties and multi-unit purchases typically need 2 to 6 months of reserves depending on the number of properties you own.

Question 11

Can self-employed borrowers get conventional mortgages?

Accepted Answer

Absolutely. Self-employed borrowers need two years of tax returns and a year-to-date profit and loss statement. The income is averaged over two years, so consistency matters more than a single high-earning year.

Question 12

What types of properties qualify for conventional financing?

Accepted Answer

Single-family homes, condos, townhomes, and 2-4 unit properties all qualify. Condos need to meet Fannie Mae or Freddie Mac warrantability requirements. Manufactured homes are eligible with certain restrictions.

Question 13

Is it better to go with a 15-year or 30-year conventional loan?

Accepted Answer

A 15-year mortgage saves you tens of thousands in interest and comes with a lower rate, but the monthly payment is significantly higher. Most buyers choose the 30-year for cash flow flexibility and invest the difference elsewhere.

Question 14

Can I refinance my conventional loan later?

Accepted Answer

Yes, you can refinance anytime there is a financial benefit. There are no prepayment penalties on conventional mortgages. Rate-and-term refinances and cash-out refinances are both common options.

Question 15

What is the minimum property appraisal requirement?

Accepted Answer

The property must appraise at or above the purchase price for a conventional loan. If it comes in low, you can renegotiate the price, bring extra cash to closing, or dispute the appraisal with comparable sales data.

Question 16

Do conventional loans require an escrow account?

Accepted Answer

Lenders typically require escrow for property taxes and insurance if your down payment is under 20%. With 20% or more down, you can often waive escrow, though some lenders charge a small fee for that option.

Question 17

What closing costs should I expect on a conventional mortgage?

Accepted Answer

Closing costs usually run 2% to 5% of the loan amount. This includes lender fees, title insurance, appraisal, and prepaid items like taxes and insurance. You can negotiate seller concessions to help cover these costs.

Question 18

Can I buy a second home with a conventional loan?

Accepted Answer

Yes. Second home financing is available with as little as 10% down. The property must be a reasonable distance from your primary residence, and you need to show you can afford both mortgage payments.

Question 19

What happens if my income changed recently?

Accepted Answer

Lenders want to see stable or increasing income. If you switched jobs in the same field, that usually works fine. A career change or gap in employment within the last two years may require additional explanation and documentation.

Question 20

Can I lock my interest rate during the application process?

Accepted Answer

Rate locks are standard and usually last 30 to 60 days. If you need more time, extended locks are available for a small fee. Locking early protects you from rate increases while your loan is processed.

Question 21

What documents do I need to apply for a conventional mortgage?

Accepted Answer

You will need recent pay stubs, two years of W-2s or tax returns, two months of bank statements, and a valid ID. Self-employed borrowers also need business tax returns and a current profit and loss statement.

Question 22

How does a rate lock work and when should I lock my rate?

Accepted Answer

A rate lock freezes your interest rate for a set period, usually 30 to 60 days. Lock when you have an accepted purchase contract and are confident the loan will close on time. If rates are volatile and trending up, locking early protects you. If rates are falling, some lenders offer a float-down option that gives you the lower rate if it drops after you lock.

Question 23

What are mortgage points and should I buy them?

Accepted Answer

One discount point costs 1% of the loan amount and typically reduces your rate by 0.25%. On a $400,000 loan, one point costs $4,000 and saves roughly $60 per month. If you plan to keep the loan for 6+ years, buying points usually pays off. If you might sell or refinance sooner, skip them.

Question 24

How can I negotiate closing costs with my lender?

Accepted Answer

Ask for a lender credit in exchange for a slightly higher rate, request the seller contribute toward closing costs (up to 3% to 6% depending on down payment), shop title insurance and settlement fees independently, and compare Loan Estimates from multiple lenders. Everything on the Loan Estimate is either fixed or negotiable -- know which is which.

Question 25

What is the difference between a rate lock and a float-down?

Accepted Answer

A rate lock guarantees your rate will not go up. A float-down is an add-on that lets you take a lower rate if the market drops before closing, usually by at least 0.25%. Float-down options typically cost 0.125% to 0.25% of the loan amount. In a declining rate environment, they can save you real money.

Question 26

How do lender credits work on a conventional mortgage?

Accepted Answer

A lender credit is when the lender pays some or all of your closing costs in exchange for a higher interest rate. For example, you might accept a rate 0.125% higher and receive $2,000 toward closing. This makes sense if you want to minimize out-of-pocket costs at closing or plan to refinance within a few years.

Question 27

Can I negotiate the appraisal fee or other third-party costs?

Accepted Answer

Third-party fees like appraisal, credit report, and title search are harder to negotiate because they go to outside vendors. However, you can shop for your own title insurance and settlement services, which can save $500 to $1,500. The lender is required to let you choose these providers.

Question 28

What happens if my rate lock expires before closing?

Accepted Answer

If the lock expires, you are at the mercy of current market rates. Most lenders offer a lock extension for a fee of 0.125% to 0.375% depending on the length. To avoid this, make sure your closing date falls within the lock period and keep your documentation moving without delays.

Question 29

How do I decide between paying points or a higher rate with lender credits?

Accepted Answer

Calculate your break-even point. If buying a point costs $4,000 and saves $60 per month, you break even in 67 months -- about 5.5 years. If you will keep the loan longer than that, points pay off. If you plan to move or refinance sooner, take the lender credit and keep more cash in your pocket.

Question 30

What is a no-closing-cost mortgage and is it really free?

Accepted Answer

A no-closing-cost mortgage rolls the costs into a higher interest rate. You pay less upfront but more over the life of the loan. On a $400,000 loan, the higher rate might cost $30 to $50 more per month. This works well if you plan to refinance or sell within 5 years.

Question 31

Can I renegotiate my rate if the market drops after I lock?

Accepted Answer

Most standard rate locks do not allow renegotiation downward. A float-down option, if you purchased one, gives you this flexibility. Some lenders will consider a renegotiation if rates drop significantly (0.5%+) and you push for it, but there is no guarantee. The best approach is to build the float-down into your lock from the start.

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