Conventional
A conventional mortgage, or can also be called a conventional loan, is a type of home loan that is unwarranted by any government agency, such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the United States Department of Agriculture (USDA). Instead, it is typically issued by a private lender, such as a bank or credit union.
Bear in mind that conventional mortgages can be either fixed-rate or adjustable-rate. To understand the difference between the two, here’s a brief explanation. A fixed-rate mortgage has an interest rate that remains the same for the entire term of the loan, while an adjustable-rate mortgage (ARM) has an interest rate that can change over time, typically in response to changes in a financial index.
Unlike government-backed loans that do not impose strict eligibility requirements to qualify, conventional loans on the other hand, set a much higher standard and may require a higher credit score and a larger down payment. However, they may also offer more flexibility in terms of the type of property that can be purchased and the terms of the lo
The Documentation Requirements:
The lender is not only looking if you can afford paying the monthly mortgage payments, he/she is also checking your assets and liabilities. Besides that, the lender is also looking to make sure if you can handle the property’s down payment. Here are the following documents that might help you with this process.
1. Proof of Income – the documents mentioned may not be limited to:
- Thirty days of pay stubs that show income as well as year-to-date income
- Two years of federal tax returns
- Sixty days or a quarterly statement of all asset accounts, including your checking, savings, and any investment accounts
- Two years of W-2 statements
Borrowers also need to be prepared with proof of any additional income, such as alimony or bonuses.
2. Assets
In order to provide proof of funds for a down payment and closing costs on a residence, you will need to present bank and investment account statements. If you are receiving a gift of money from a friend or relative to help with the down payment, you will need to provide gift letters that state that the money is not a loan and does not need to be repaid. These letters may need to be notarized. Read more about assets and why it is important when applying for a home loan.
3. Employment Verification
Lenders want to ensure that they are lending to borrowers with stable employment histories. They may request pay stubs and verify employment and salary with your employer. If you have recently changed jobs, they may also want to contact your previous employer. If you are self-employed, you will need to provide additional documentation about your business and income.
4. Other Documentation
In order to obtain your credit report, your lender will need a copy of your driver’s license or state identification card, your Social Security number, and your signature.
