Conventional Loan Requirements
To qualify for a conventional loan, most lenders look for a credit score of at least 620, a debt-to-income ratio commonly up to 45%, stable and documented income, enough cash for the down payment and reserves, and a property that appraises and meets program rules. Requirements vary by program and by occupancy.
Key Takeaways
- Minimum credit score is 620 for most conventional loans; higher scores earn better pricing.
- DTI is commonly up to 45%, and up to about 50% with a strong automated approval and compensating factors.
- Expect to document two years of employment history, plus pay stubs, W-2s or tax returns and bank statements.
- The home must appraise at or above the price and meet property and occupancy rules.
What credit score do I need?
Most conventional loans require a 620 minimum. Your score affects your rate and the cost of PMI, so a higher score lowers your monthly cost. Lenders look at your whole credit history, including late payments, collections and recent inquiries. Not every lender uses the same scoring, so we help you understand which score matters. See credit score for a conventional loan. If your score is below 620, FHA may be an option.
What debt-to-income ratio is allowed?
Debt-to-income ratio (DTI) compares your monthly debt payments, including the new mortgage, to your gross monthly income. Conventional loans commonly allow up to 45%. With a strong automated approval and compensating factors such as high reserves or a high score, it can reach about 50%. See maximum DTI for a conventional loan.
What income and employment do I need to show?
Lenders want to see stable, likely-to-continue income, usually with a two-year history. Salaried and hourly workers use pay stubs and W-2s. Self-employed borrowers typically use two years of tax returns and may need a profit and loss statement. Bonus, commission, overtime and rental income can count with history. See conventional loans for the self-employed and Airbnb income. If your income does not fit standard documentation, see non-QM loans.
How much cash and reserves will I need?
You need your down payment, closing costs and, for many loans, reserves. Reserves are savings left after closing, usually counted in months of the full housing payment. Requirements rise for second homes, investment properties and multiple financed properties. Funds must be sourced and seasoned, which is why lenders ask for bank statements. See down payment options, gift funds and closing costs in California.
What property types and occupancy are eligible?
- Property types: single-family homes, condos, townhomes, planned developments and one- to four-unit properties. Condo projects must meet program standards. Some manufactured homes qualify.
- Occupancy: primary residence, second home or investment property. Down payment and reserves rise in that order.
- Loan amount: within your county conforming or high-balance limit. See conventional loan limits in California.
You can finance more than one property, with limits. See how many properties you can finance.
What does the appraisal check?
The appraisal confirms the home’s value supports the loan and that it meets basic condition standards. If it comes in below the price, you may need to renegotiate, bring more cash or dispute it. Some loans may qualify for an appraisal waiver, depending on the automated underwriting findings and the lender.
What documents should I gather?
- Government photo ID and Social Security number
- Pay stubs for the last 30 days and W-2s for two years
- Federal tax returns for two years (always for self-employed, sometimes for others)
- Profit and loss statement and business license if self-employed
- Bank and investment statements for the last two months, all pages
- Gift letter and donor’s proof of funds, if applicable
- Statements for current debts and your rental or mortgage history
- Purchase contract and earnest money proof
- Explanation letters for large deposits, gaps in employment or credit events
What if I do not meet a requirement?
You may have options. Paying down debt, raising your score, adding a co-borrower or switching to another program can all help. The who qualifies guide explains more. Also compare benefits and cons, and ask whether a conventional loan is right for you. Return to the Conventional Loans hub.
At Lendia, we check your file before you shop
At Lendia, we review your credit, income and assets up front, compare options from multiple lenders, and tell you where you stand. Contact us or get a rate quote now.
Frequently Asked Questions
What is the minimum credit score for a conventional loan?
Most conventional loans require 620.
How long must I be at my job?
Lenders typically want a two-year history, but a shorter history can work in some cases, such as a recent graduate in the same field. We review your situation.
Can I qualify with a high DTI?
Sometimes. A DTI up to about 50% may be possible with a strong automated approval and compensating factors.
Do I need reserves?
Often, especially for second homes, rentals and larger loans. The amount depends on the program and property.
Can I use gift funds?
Often yes, with documentation, though rules vary by occupancy and down payment.
Does a past bankruptcy or foreclosure disqualify me?
Not permanently. Waiting periods apply and depend on the event. Rates and terms depend on your situation; approval requires qualification.
Talk to a Licensed Lendia California Loan Officer
At Lendia, we review your situation and show you the programs you qualify for.