Conventional Loans Explained

Jan 29, 2021

If you’re ready to apply for a mortgage, the first step is sitting down with a mortgage professional to decide which loan program is right for you. Over the next few weeks, we’ll be defining a few of the most-popular loan programs that we offer at InterLinc.

Mortgages can be defined as either government-backed or conventional. Mortgages not guaranteed (or insured) by Government agencies such as the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA) or the US Department of Agriculture (USDA) are known as conventional home loans.

Conventional loans are guaranteed by private lenders such as banks, credit unions, or mortgage companies, or by government-sponsored enterprises (GSEs) such as Freddie Mac and Fannie Mae. Conventional loans represent approximately two-thirds of the home loans issued in the United States. 

Conventional loan guidelines are currently as follows:

  • 620 Min FICO
  • Max Loan Amount $510,400
  • Down Payment Options:
    • 3% first-time homebuyer
    • 5% primary residence
    • 20% investment property
    • 10% second home
  • Terms: 15, 20, 25 or 30 Years
  • Income/Debt Ratio: 28% Housing/36% Total Debt
  • Seller Contributions:
    • 2% of sales price on investment property
    • 3% of sales price LTV 90.01-95%
    • 6% of sales price LTV 75.01-90%
    • 9% of sales price LTV 75% or below


Other important information:

  1. For Loan-to-Values above 80%, there will be PMI (Private Mortgage Insurance). The higher the down payment, the lower the PMI.
  2. 5% down payment must be from the borrower’s own funds.
  3. Funds to close may come from a secured loan. The terms and monthly payment amount must be verified and included in the total debt ratio.
  4. Funds may come from a sell of an asset (automobile, boat, etc.). Must document ownership and value of secured item. Require copy of bill of sale and proof of funds received. A gift from a relative may be used as long as the first 5% is the borrowers own documented funds.


* InterLinc Mortgage Services, LLC. NMLS ID: 205696. InterLinc is an Equal Housing Lender. DISCLAIMER: This is not a commitment to lend. Credit and collateral are subject to approval. Other restrictions may apply. Programs, rates, terms and conditions are subject to change without notice.