A classic Italian baked Eggplant Parmesan casserole with breaded eggplant slices layered with Mozzarella, Parmesan, basil, and tomato sauce.
Eggplant parmesan is one of those great Italian comfort foods—a layered casserole much like lasagna but with slices of globe eggplant taking the place of pasta.
The two things to keep in mind when cooking eggplant, especially firm globe eggplants, is that not only do eggplants hold onto moisture, they also absorb oil like a sponge. So if you’re not careful you can end up with something mushy and oily.
CONVENTIONAL LOAN REQUIREMENTS AND CONVENTIONAL MORTGAGE GUIDELINES
What is a Conventional Loan?
A conventional loan by definition is any mortgage not guaranteed or insured by the federal government. Conventional loans can be either “conforming” or “non-conforming”, although conventional loan requirements generally refer to mortgage guidelines that ‘conform’ to government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac. Therefore, when you’re searching for more information on ‘conventional loans’, ‘conforming loans’ or ‘conventional conforming loans’, you’re likely referring to the same thing.
What is a Conventional Conforming Loan?
Conventional conforming loans follow the guidelines set forth by Fannie Mae, Freddie Mac and the Federal Housing Finance Agency (FHFA). In the overall sphere of mortgage requirements, conventional conforming loans are the most straightforward. Good borrower credit history, skin-in-the-game down payments, and full documentation of income and assets are the standard for conforming loan approval. These requirements have made them a pillar of the housing market for decades.
What are Conventional Conforming Loan Requirements?
To decide if you qualify for a conventional mortgage, various aspects of your financial history will be looked at. How does that happen? Fannie Mae provides a powerful application called “Desktop Underwriter” that helps conventional loan lenders quickly evaluate mortgage applicants. “DU” software instantly analyzes the borrower’s finances, assets, employment history, and credit profile. Freddie Mac also provides a similar program called “Loan Prospector“.
These helpful “Automated Underwriting System” (AUS) programs speed up the mortgage approval process by leaps and bounds. Modern AUS software follows strict guidelines that are important to understand before loan submission. These requirements will be evaluated.
1. Income and Debt Requirements
Income and monthly expenses are important. Conventional mortgages qualify applicants using fractions and percentages that weigh their income and their ability to repay their mortgage on time. Debt-to-income ratios are used (DTI) to evaluate applicant earnings and expenses. Conventional debt-to-income ratios are known as the ‘Front Ratio’, and the ‘Back Ratio’. Standard conforming loan debt-to-income ratio limits are 28%/36%. These DTI limits may be exceeded with compensating factors.
Conventional Loan Debt-to-Income Ratio Limits
To be eligible for an conventional mortgage, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (28% front ratio). You must also have enough income to pay your housing costs plus all additional monthly debt (36% back ratio). These percentages may be exceeded with compensating factors.
Components of the conforming conventional loan debt-to-income ratio formula include:
- 28% Front End Debt-to-Income Ratio – The new housing payment may not exceed 28 percent of the applicants combined monthly income.
- 36% Back End Debt-to-Income Ratio – The new total monthly debt amount, including new home payment, may not exceed 45 percent of the applicant’s combined monthly income. Flexibility up to 50% DTI may be offered for certain applicants with strong compensating factors.
- 43% “Qualified Mortgage” Debt-to-Income Limit – Although not always required, the back/bottom debt-to-income ratio for the new home loan can’t exceed 43% to be considered a “Qualified Mortgage“.
- You must adhere to conventional loan debt-to-income ratio requirements through documented income.
- You must have a history of reliable income for at least two years.
Debt-to-Income Ratio Calculator
2. Credit Requirements
Your credit history is vital to getting approved for a conventional mortgage. The minimum credit score for conventional loan programs is usually a 620 FICO or above. Conventional loan qualifications are risk-based with a heavy emphasis placed on a borrowers credit profile. The lender will pull the borrower’s credit report from the three major credit bureaus and their credit scores and credit history will be examined thoroughly.
Conventional loan guidelines require borrowers to have a minimum middle FICO score of 620-680 for approval. Applicants must have made all housing payments on time for at least 12 months. Conventional mortgage requirements contain significant waiting periods after a bankruptcy or foreclosure. Conforming loans adhere to the following credit guidelines for approval:
- The minimum conventional loan credit score is 620-680+ depending on the program.
- The interest rate is based on credit score, and 720+ obtains the best rate.
- LTV requirements are based on credit score. Better scores have higher LTV limits.
- Mortgage insurance requirements are driven off credit score and LTV.
- Applicant can’t have late payments in the last year.
- Applicant can’t have outstanding judgments in the last year.
- At least two years must pass after Chapter 13 bankruptcy.
- At least four years must pass after Chapter 7 bankruptcy.
- At least four years must pass after foreclosure.
- At least two years must pass after short sale with 20% down payment, four years with 10%, seven years with less than 10%.
Can I get an Conventional Mortgage Loan after bankruptcy?
Conventional mortgage loan requirements state that if you have been discharged from a Chapter 7 bankruptcy for four years or more, you’re eligible to apply. If you’ve had a Chapter 13 bankruptcy, you must document that your credit reputation has been re-established for at least two years.
3. Property Requirements
Property requirements for conventional financing are easier to understand and comply with than other programs like FHA loans. For a property to be eligible, it must have a home appraisal performed by a licensed appraiser from the area. Conforming appraisal standards adhere to standards set forth by the Uniform Standards of Professional Appraisal Practice (USPAP).
Conforming appraisal requirements are also strictly regulated by the Home Value Code of Conduct (HVCC), which prohibits lenders or realtors from selecting or influencing appraisers in any way. Under HVCC rules, the appraiser is selected at random. Once selected, they perform a full appraisal of the subject property to determine its condition and its value.
The appraised value of a home is determined by using a combination of the assessment of the property itself and also by the recent value of comparable properties (comps) in the same area. Conventional mortgage loan requirements call for at least three comps to the subject property. For the property to qualify, the appraised value must return greater than or equal to the minimum loan-to-value requirements for the desired conforming loan program. Minimum LTV requirements for conforming loans are between 80% and 97%, depending on the program and mortgage insurance requirements.
What types of property are eligible?
Depending on the specific program, conventional mortgage guidelines allow you to purchase warrantable condos, planned unit developments, modular homes, manufactured homes, and 1-4 family residences. Conventional loans can be used to finance primary residences, second homes and investment property too.
4. Conventional Loan Limits
The maximum conventional conforming loan amount is $453,100 across most of the U.S. for single-family homes. Conventional loan limitsare based on local home values and can vary depending on the area.
What is the maximum amount that I can borrow?
The maximum mortgage amount forconventional mortgage loans are determined by a couple factors. There is a maximum loan limit and a loan-to-value ratio (LTV Ratio) based upon the home’s appraised value. Here’s how those are calculated:
Maximum loan amount: The maximum loan amount allowed for an conventional conforming loan varies from county to county. The highest maximum conventional conforming loan for single-family homes is $871,450. The lowest maximum Conventional Mortgage amount available in any county is $453,100. To see what the limit is in your county, check at the link below. Conventional loan limits are listed for most U.S. territories and states.
Maximum financing: Depending on the state where the property is located, the maximum conventional mortgage loan-to-value ratio will be 80% – 97% of the official appraised value of the home or its selling price, whichever is lower.