Conventional Loans in Florida | Florida Mortgage Providers — Florida Mortgage Providers

A conventional mortgage is a home loan that is not insured or guaranteed by a federal government agency. Many conventional loans are considered conforming loans because they meet underwriting and loan-limit requirements for mortgages eligible for purchase by Fannie Mae and Freddie Mac.
Conventional financing can be used for a variety of purposes, including purchasing or refinancing a primary residence, second home or investment property. Available terms and qualification requirements vary depending on factors such as credit history, debt-to-income ratio, down payment, property type and occupancy.

Conventional Loan Requirements

Credit Requirements
Credit requirements vary by loan program and borrower profile. A stronger credit profile may provide access to more favorable rates, terms and mortgage insurance options.

Debt-to-Income Ratio
Existing monthly debts and the proposed housing payment are considered in relation to qualifying monthly income. Allowable debt-to-income ratios vary based on the overall loan profile and underwriting findings.

Down Payment
Conventional loans may offer relatively low down payment options for qualified borrowers purchasing a primary residence. Required down payments can vary based on occupancy, property type and other factors.

Assets & Reserves
Funds may need to be documented for the down payment, closing costs and, in some situations, financial reserves remaining after closing.

Income & Employment
Borrowers generally must document stable and sufficient qualifying income to demonstrate the ability to repay the mortgage.

Property & Occupancy
Conventional financing may be available for primary residences, second homes and investment properties. Requirements can differ depending on occupancy and property type.

How Much Down Payment Do You Need for a Conventional Loan?

The minimum down payment for a conventional loan can be as little as 3% for certain qualified borrowers, although many conventional loan programs require 5% or more. The amount required depends on factors such as whether you are purchasing a primary residence, second home or investment property, as well as the specific loan program and borrower qualifications.

A larger down payment can reduce the amount you need to borrow and may improve loan pricing or reduce mortgage insurance costs. A 20% down payment is not required for many conventional home purchases; however, putting at least 20% down will generally eliminate the need for private mortgage insurance (PMI) on a conventional loan.

3% Down Payment
Certain conventional programs may allow qualified borrowers purchasing a primary residence to finance up to 97% of the purchase price. Eligibility requirements apply.

5%–10% Down Payment
Many borrowers choose to put 5% to 10% down. The appropriate amount depends on available funds, loan structure, mortgage insurance and the borrower’s overall financial goals.

When Is Private Mortgage Insurance (PMI) Required?

Private mortgage insurance (PMI) is generally required when a borrower obtains a conventional loan with less than 20% down. PMI protects the lender in the event of borrower default, although the cost is typically paid by the borrower. Mortgage insurance may be paid as part of the monthly mortgage payment or, with certain loan options, through a higher interest rate in place of a separate monthly PMI payment.

The cost of PMI can vary based on factors such as credit profile, down payment, and debt-to-income ratio. With borrower-paid conventional PMI, the mortgage insurance may generally be removed once applicable equity and loan requirements are met. When mortgage insurance is instead incorporated into the interest rate, there is no separate monthly PMI payment to remove.

Second Homes & Investment Properties

Conventional financing is also available for second homes and investment properties, although these generally require larger down payments than a primary residence. The amount required can vary based on property type, number of units, occupancy, loan purpose and the borrower's overall qualifications.

20% Down Payment
Putting 20% down generally eliminates the need for private mortgage insurance and reduces the loan amount, but it is not necessary to put 20% down to obtain many conventional loans.

What Credit Score Do You Need for a Conventional Loan?

A credit score of 620 is commonly considered the minimum for many conventional conforming loan programs, although meeting a minimum credit score does not necessarily mean a borrower will qualify. Loan approval also depends on factors such as income, debt-to-income ratio, assets, down payment, property type and the overall strength of the loan application.

Credit score can also have a significant impact on the interest rate, loan pricing and private mortgage insurance (PMI) available to a borrower. In general, borrowers with stronger credit profiles may qualify for more favorable financing terms, while borrowers with lower scores may still have conventional financing options depending on the overall loan profile.

Conventional vs. FHA With a Lower Credit Score

Borrowers with lower credit scores may want to compare conventional financing with an FHA loan rather than assuming conventional financing is automatically the better choice. Although a borrower may meet the minimum credit requirements for a conventional loan, conventional private mortgage insurance can become considerably more expensive as credit scores decline, particularly when combined with a smaller down payment.

FHA mortgage insurance works differently. The annual FHA mortgage insurance premium does not generally increase simply because a borrower has a lower credit score, which can make FHA financing comparatively attractive for some borrowers with lower credit scores. FHA loans also generally require an upfront mortgage insurance premium of 1.75% of the base loan amount, which is commonly financed into the loan.

For borrowers with credit scores below 700—and particularly below 680—it can be worthwhile to compare conventional and FHA financing side by side. FHA financing may offer a lower interest rate and mortgage insurance that is less sensitive to credit score, although FHA mortgage insurance may remain in place even at lower loan-to-value ratios. While conventional financing may offer advantages at lower loan-to-value ratios because private mortgage insurance can potentially be avoided or later removed. The better option depends on the complete loan profile, including credit score, down payment, debt-to-income ratio, interest rate, mortgage insurance costs and how long the borrower expects to keep the mortgage.

Qualifying for a conventional loan does not necessarily mean it is the most economical loan option.

Interest Rate & Loan Pricing
Credit score is one of the factors used in determining conventional mortgage pricing. A stronger credit profile may result in a lower interest rate and/or reduced loan-level pricing adjustments.

Private Mortgage Insurance
For borrowers putting less than 20% down, credit score can significantly affect the cost of PMI. Two borrowers with the same down payment may have different mortgage insurance costs based on their credit and other risk factors.

Overall Loan Qualification
Credit score is only one part of conventional underwriting. Debt-to-income ratio, down payment, reserves, income stability, property type and other factors are considered together when evaluating the loan.

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Disclosures & Disclaimers:
Florida Mortgage Providers, Inc is a licensed mortgage broker in the State of Florida. All loans are subject to credit and property approval. Program terms, rates, and conditions are subject to change without notice. This is not a commitment to lend.

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