What Do I Need to Qualify for Conventional vs. Non-Conventional Loans?

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Qualifying for either a conventional or non-conventional loan comes with a significant amount of verification. In general, the qualifications for each loan type will be as follows:

Conventional Mortgage Loan Requirements 
The following factors must be taken into consideration when applying for a conventional mortgage loan:

• Credit score: The minimum credit score to qualify for a conventional mortgage ranges from 620 to 640, depending on the lender.
• Documentation: Lenders will require you to provide documentation that verifies your income, your ability to pay debts, as well as your spending habits.
• Income and assets: Lenders will use your bank and investment account statements to verify that you have sufficient means to cover the down payment and closing costs.
• Minimum Down Payments: Most lenders will require 5% down but it could be up to 20%. Some states such as Maine, New Hampshire and Massachusetts offer options that allow for 3% down.
• Property Eligibility Type: Almost any type of property can qualify to use a conventional mortgage, including warrantable condos, modular homes and multifamily residences.
• Sufficient DTI Ratio: Most lenders will permit a maximum debt-to-income ratio of 43%.
• Private Mortgage Insurance (PMI): Any borrower that qualifies for a conventional mortgage and pays less than 20% down will be required to pay PMI. PMI for a conventional loan typically costs between 0.5% and 1% of the entire loan on an annual basis.

Non-Conventional Loan Requirements
When it comes to non-conventional mortgages, the requirements will vary by loan type. Below is a breakdown of the differing requirements.

• VA Loans: VA loans are only available to veterans or qualifying family members.
• FHA Loans: Require a credit score of at least 580, a minimum down payment of 3.5% and MIP on the life of the loan if you put less than 10% down.
• USDA Loans: Requirements include that income limits that vary by city and state and that borrower must pay the guarantee fee. Additionally, lenders will consider the income of everyone in the household, not just the borrower.

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