Most simply stated, a conventional loan means a homebuyer’s mortgage is not backed or insured by a government agency such as the Federal Housing Administration (FHA) or Veterans Administration (VA). Buyers can use a conventional mortgage to purchase a one- to four-unit home, a condominium, modular or manufactured home as a primary, secondary or investment property.
Conventional loans can be used to purchase primary, secondary or investment properties such as:
Down payments for a conventional purchase loan can be as little as 3% for qualified buyers. However, generally the borrowers for a Conventional loan have a down payment between 5% to 20% percent of a home’s purchase price. On a refinance, a conventional loan can have a loan-to-value (LTV) ratio as high as 95% with the addition of private mortgage insurance (PMI) or lender paid mortgage insurance (LPMI).
On a conventional loan, we will consider a buyer’s debt-to-income (DTI) ratio, which is determined by calculating the projected housing costs and actual recurring monthly expenses.