Conventional Home Loans In New Mexico

What is a Conventional Loan?

A conventional mortgage is a home loan not guaranteed by a government agency such as the Department of Veterans Affairs or the Federal Housing Administration. Private lenders such as banks, credit unions, and other financial institutions often provide and secure conventional loans.

Conventional loans are frequently compared with government-backed loans, such as FHA, designed to assist homebuyers with imperfect credit or limited down payment funds. However, conventional loans are popular with buyers and account for a significant share of purchases and refinances.

A conventional loan is distinguished by the fact that it meets the requirements of government-sponsored enterprises, Fannie Mae or Freddie Mac. This means that conventional loans must adhere to specific lending rules established by these institutions, such as loan size limitations and borrower creditworthiness.

Conventional Conforming vs. Non-Conforming Loans

A conventional loan can either be conforming or non-conforming. The main difference is whether they meet the requirements established by Fannie Mae and Freddie Mac and the Federal Housing Finance Agency (FHFA), which governs them.

A conventional conforming loan meets the criteria for sale to Fannie Mae or Freddie Mac, two major mortgage buyers in the United States. Conforming loans are subject to a monetary limit that varies yearly. The maximum in most regions of the United States in 2023 is $726,200; however, it is higher in some more pricey areas.

A typical non-conforming loan, on the other hand, does not fulfill the requirements established by Fannie Mae, Freddie Mac, and the FHFA and hence cannot be sold to either Fannie Mae or Freddie Mac. Non-conforming loans often have a considerably broader range of loan kinds and features, which may vary depending on the lender.

Qualification Requirements of a Conventional Conforming Loan

The qualification requirements for a conventional conforming loan typically include the following:

• Credit Score

A credit score of at least 620 is usually required for borrowers to qualify for a conventional conforming loan. Credit scores of 740 or above may be eligible for reduced down payments and better interest rates.

• Debt-to-Income Ratio

The DTI ratio should generally be less than 43%, though this may vary based on the borrower’s credit score. Some lenders may need a DTI ratio of less than 45% for conforming loans.

• Down Payment

A conforming loan typically requires a minimum down payment of 3 – 5% or more, depending on the borrower’s credit score. Borrowers may need mortgage insurance if their down payment is less than 20%.

• Employment and Income

Borrowers should have a consistent employment history and enough income to cover monthly mortgage payments. A two-year verifiable work history is required to qualify for a conventional loan.

• Loan Limits

The loan amount must be less than the Federal Housing Finance Agency’s conforming loan maximum. In 2023, the maximum for most of the United States is $726,200, but it may be as high as $1,089,300 in high-cost areas.

Apply for a Conventional Loan with Capital Home Mortgage New Mexico

Buying a home is a huge accomplishment, and Capital Home Mortgage can assist in making the process as straightforward and enjoyable as possible. We are a full-service home mortgage company with a diverse range of mortgage products and a commitment to offering unrivaled customer service.

Call us at (505) 448-8884 to speak with one of our Home Loan Specialists and get started on your journey to homeownership!