Many different factors contribute to a home buyer’s eligibility for acquiring a conventional loan. In general, a lender will usually look at your income and monthly expenses and determine if the debt-to-income ratios are within the standard limits (although this ratio may be exceeded in certain circumstances), as well as your credit history and overall spending habits.
Eligibility
In order to be eligible for a conventional loan, the monthly housing costs (which include the principal, interest, insurance, and property taxes) must be at a certain percent of the gross monthly income. You must be able to show that you have enough income to cover those costs plus all other debts. The standard debt-to-income ratios are 28/36 for conventional loans – or 28% ratio for housing costs, and 36% ratio for additional monthly debt.
It is still possible to qualify for a conventional loan after bankruptcy, if you have been discharged form a Chapter 7 bankruptcy for four years or more. A Chapter 13 bankruptcy, on the other hand, will require proof that your credit has been re-established for at least two years before you can file an application.
Down Payments
Conventional loans have been a great option for homebuyers with good credit history and the ability to make a substantial down payment. Most of these loans will require the buyer to invest at least 5% – 20% of the sale price up front.
Conventional Loan Limits
The conventional loan limits vary from state to state depending on a number of factors such as: the location of the home to the type of housing (single family, duplex, etc.) Before you start the application process it is important to know the loan limits in your area. Over the past few years, these limits have changed, as the housing market has changed considerably, and we can help you make the best decisions based on the current limits in your area.