What is Conventional Bank Loan?

You're definitely familiar with conventional finance if you already own a property that serves as your primary residence. A conventional mortgage follows Fannie Mae or Freddie Mac criteria, and unlike the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the United States Department of Agriculture (USDA), it is not backed by the federal government.

The standard down payment requirement for conventional financing is 20% of the home's buying price. A down payment of 30% on an investment property, on the other hand, may be required by the lender.

A conventional loan's approval and interest rate are determined by your own credit score and credit history. Borrowers' income and assets are also scrutinized by lenders. Borrowers must also demonstrate that they can afford their current mortgage as well as the monthly loan payments on an investment property.

Future rental revenue isn't taken into account when calculating debt-to-income (DTI), and most lenders need borrowers to have at least six months' worth of cash saved aside to fulfill both mortgage commitments.

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