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Home Conventional Loan

Minimum Down Payment for Conventional Mortgage | Credit Requirements

by Nicholas Auriemma, NMLS# 1455001
5 years ago
in Conventional Loan, Purchase
Minimum Down Payment for Conventional Mortgage Credit Requirements

Minimum Down Payment for Conventional Mortgage | Credit Requirements

The biggest factors that determines the minimum down payment for conventional mortgage is occupancy type, property type, and credit profile. Conventional loan credit requirements are determined during the pre-approval process by running credit, capacity, and collateral through an Automated Underwriting System (AUS). Every case scenario will vary, but there are guidelines for down payment options and the credit score needed for a conventional loan.

Occupancy Type – Primary, Secondary, and Investment

Occupancy type plays a major role in the minimum down payment for conventional loans. Interest rates also have pricing adjustments depending on if the property is a primary residence, secondary residence, or investment property. The minimum down payment for conventional loan for a 1 unit property is:

  • Primary or principal residence require a minimum down payment of 3% with conventional grants available.
  • Second homes require a minimum down payment of 10%.
  • Investment properties require a minimum down payment of 15%.

The number of units play a major roll in down payment options for conventional loans.

Property Type – Number of Units

For conventional loans, they require a larger down payment than FHA or VA loans when it comes to 2 to 4 unit properties. FHA requires a minimum down payment of 3.5% up to 4 units.

  • For a primary residence, the minimum down payment is 5%, but there can be income limits depending on the location of the property.
  • For investment properties, the minimum down payment for conventional loan is 25% for 2 to 4 units.

Even though there are guidelines on the minimum down payment for conventional loan, conventional loan credit requirements are determined by your overall credit profile.

Credit Score Needed for Conventional Loan

Conventional loan credit requirements are determined by an Automated Underwriting System (AUS). The minimum credit score needed for a conventional loan is 620 FICO. The guidelines are published in:

  • Selling Guide: Fannie Mae Single-Family.
  • Seller/Servicer Guide: Freddie Mac Single-Family.

Just because the guidelines are published, not all lenders follow their guidelines. Lenders can have an additional guideline on top of already established rules called an overlay.

Streamlined Process through an Automated Underwriting System

Understanding all guidelines can often be confusing to even mortgage and real estate professionals. The process is streamlined through an Automated Underwriting System (AUS) that is run during the pre-approval process.

Fannie Mae and Freddie Mac Down Payment Matrix

Principal residence:

  • 1 unit – 3% down payment with grants available.
  • 2 to 4 unit – 5% down payment option available.

Second homes:

  • 1 unit – 10% down payment.

Investment:

  • 1 unit – 15% down payment.
  • 2 to 4 unit – 25% down payment.

Debt-Service Coverage Loan with No Personal Income

Investment options are available with no personal debt-to-income ratios. The DSR loan requires a minimum of 15% down and terms are based on the cash flow of the property.

Max Cash Out on Investment Property

Minimum down payment for conventional mortgage and max cash out on investment property is determined by credit, capacity, and collateral.

  • Max cash out on an investment property for a 1 unit is 75% loan-to-value for traditional loans.
  • 2 to 4 units max cash out on an investment property is 70% loan-to-value.
  • Higher max cash out on investment property loan-to-values are made available through Non-QM loans.
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Nicholas Auriemma, NMLS# 1455001

Nicholas Auriemma, NMLS# 1455001

Nicholas Auriemma is a Loan Originator at Nationwide Mortgage & Realty, LLC, providing information on mortgages that can often be confusing even to real estate and mortgage professionals. Borrowers can be discouraged because mortgage professionals can be mistaken due to guidelines always changing, the extent of guidelines, their company having an overlay (stricter guideline), or other lenders not offering a loan program. Call or text Nick anytime at 630-779-8430 or email at nick@nationwidemtg.net.

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  • Home
  • Request Information
    • Apply Now
  • About Us
    • Career Opportunities
    • Contact Us
    • Meet the Team
  • Purchase
    • Conventional Loan
    • Condotel & Non-Warrantable
    • FHA Loan
    • FHA 203k
    • Fix & Flip
    • Investment
    • Jumbo & High Balance
    • New Construction
    • Non-QM Loans
    • USDA Loan
    • VA Purchase Loan
  • Refinance
    • Cash Out & Debt Consolidation
    • Conventional Refinance
    • Condotel & Non-Warrantable
    • FHA 203k
    • FHA Streamline Refinance
    • Investment
    • Non-QM Loans
    • Reverse Mortgage
    • VA IRRRL
  • Loan Process
    • Application Checklist
    • Credit Report
    • Home Buying Do’s and Don’ts
    • Interest Rates
    • Mortgage Calculator
    • Pull Credit
  • Mortgage Blogs
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