How to Get Conventional Loans
- 1). Raise you credit score as high as possible. Reduce your debt by paying off credit card balances and consolidating high-interest loans. Make monthly payments on time and avoid opening a new line of credit before applying for a conventional loan. It is important to have the best credit score possible, since it directly affects your interest rate.
- 2). Save money and have three to six months of cash reserves in a checking or savings account. This gives the lender proof that you have the funds to pay the loan in the event of a job loss or other event.
- 3). Find a mortgage broker or bank that offers conventional loans. Complete an application and provide the required documentation, such as bank statements, employment verification, W-2s and pay stubs.
- 4). Show a steady source of income when applying for a conventional loan. Since conventional loans are not guaranteed by the federal government, the lender is more likely to approve your loan if you should you have the means to repay it. Use pay stubs, W-2s and bank statements to prove your income.
- 5). Provide a down payment of 5 to10 percent on the loan amount. Conventional loans generally finance between 90 and 95 percent of the property value, which requires the borrower to provide a down payment for the balance in the form of cash or other collateral.
- 6). Complete the loan documents provided by the lender, including an agreement to pay mortgage insurance, which is added to your monthly payment. After you reach 20 percent equity in your home, contact your lender about dropping the mortgage insurance from your payment.
