Conventional Loan Requirements for 2024 - NerdWallet (2024)

FAQs

What is the DTI limit for conventional loans in 2024? ›

Conventional loan requirements vary by lender, but usually include a credit score threshold, down payment, income, and employment requirements, and a debt-to-income ratio not exceeding 43 or 45 percent.

The national conforming loan limit for 2024 for a one-unit property is $766,550.

Down payment: While 20 percent down is the standard, many fixed-rate conventional loans for a primary residence allow for a down payment as small as 3 percent or 5 percent. Private mortgage insurance (PMI): If you put down less than 20 percent, you'll have to pay PMI, an additional fee added to your payments.

First-time homebuyers may qualify for a conventional mortgage with a down payment as low as 3%. Just be aware that when you put down less than 20%, you're often required to purchase PMI.

For today, Wednesday, May 08, 2024, the national average 30-year fixed jumbo mortgage interest rate is 7.29%, down compared to last week's of 7.41%. The national average 30-year fixed jumbo refinance interest rate is 7.31%, down compared to last week's of 7.39%.

Often, a mortgage is considered non-conforming because it's for an amount higher than the conforming loan limit ($766,550 for most mortgages in 2024), also known as a jumbo loan. A loan could also be considered non-conforming if the borrower doesn't meet other Fannie and Freddie credit or financial criteria.

Because the government doesn't cover their potential losses, conventional lenders impose higher financial standards on borrowers who want to take out a conventional loan than they do on borrowers who want to take out a government-backed loan.

Conventional loans have more stringent requirements than government-backed mortgages, but that doesn't mean it's significantly harder for most borrowers to get approved for one. The better your credit and finances, the more likely you are to get approved.

Appraisers are required to identify and document any lead-based paint hazards and recommend appropriate remediation measures. Additionally, home inspections may uncover issues such as structural defects, plumbing problems, or safety hazards that could affect the property's value and appraisal requirements.

Bad Credit History

Most lenders won't approve if your FICO score is less than 620. And according to a leading loan software company, the average credit score for homebuyers who qualify for conventional financing is 720.

Is it better to put 20 down or pay PMI? ›

If you can easily afford it, you should probably put 20% down on a house. You'll avoid paying for private mortgage insurance, and you'll have a lower loan amount and smaller monthly payments to worry about. You could save a lot of money in the long run.

Home-price growth increased in January 2024 by 6 percent, according to S&P CoreLogic's latest Case-Shiller Index. That's the fastest annual growth since 2022. Bankrate's latest national survey of large lenders shows the average rate on a 30-year mortgage was 7.05 percent as of April 3, 2024.

There are many factors that impact whether or not you can get a mortgage, and your DTI is just one of them. Some lenders may be willing to offer you a mortgage with a DTI over 50%. However, you are more likely to be approved for a loan if your DTI is below 43%, and many lenders will prefer than your DTI be under 36%.

Maximum DTI Ratios

The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix. For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%.

Generally, you will have more programs available to you with a low DTI ratio. With an FHA loan, the DTI limit is 43%. However, under some circ*mstances, some lenders may allow a DTI of up to 50%. With a HomeReady loan, the DTI limit is up to 50%.