Rules for Conventional Mortgages

Move into a new home after qualifying for a conventional mortgage.

Move into a new home after qualifying for a conventional mortgage.

Owning a home has advantages and disadvantages. You can deduct property taxes and the interest on your mortgage payment from your taxes; however, a mortgage can also be a long-term financial obligation that does not make sense for everyone. If you have decided to purchase a home, you will have to meet certain requirements in order to be approved for a mortgage.

Credit Scores

To get a conventional mortgage, a credit score of 620 or above is typically required, according to website Scores range from 300 to 850. Typically, the higher your credit score, the lower interest rate you will receive and the down payment required will be lowered. The lowest interest rates require a score of 720 or above, according to Those with scores between 640 and 720 will be offer rates about 1 to 2 percentage points higher than those offered to applicants with excellent credit scores. Those with less than a 620 credit score will require at least 25 percent down with an interest rate at least 4 percentage points higher.

Payment History

In addition to being a factor in your credit score, payment history is a factor in mortgage decisions on its own. Underwriters will look at the past seven years for major issues such as bankruptcies. They will also look at the past two years of mortgage and rent history, car payments, credit card payments, and collections. The mortgage and rent history is the No. 1 priority, and you typically will not qualify for a conventional mortgage if you have been 30 days later on your rent or mortgage during the past year.

Debt-to-Income Ratio

Mortgage underwriters look at how much debt you have in comparison to how much income you make to determine whether you will be capable of paying your mortgage. The standard ratios for a conventional mortgage are 28 and 36 (typically written as 28/36). The first number is the housing expense-to-income ratio and means your monthly housing expenses should not be more than 28 percent of your monthly gross income. The second number is your monthly obligations-to-income ratio, which means that your total debt -- including credit cards and car payments -- should not be more than 36 percent of your income.

Down Payment

To buy a property with a mortgage, you must put down a certain amount of cash first. This typically ranges from 5 to 20 percent of the price of the house. Traditionally, a conventional mortgage calls for 20 percent down. However, those with excellent credit scores could qualify for a low-interest mortgage that only calls for 3 percent of the purchase price, according to CNN Money.


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