Conforming loans
1. Conforming loans are mortgages that conform to financing standards set by the federal government, and can therefore be purchased by Fannie Mae and Freddie Mac. Most buyers use conforming loans.
- Minimum credit score of at least 620
- Maximum debt-to-income ratio of 43% (this is known as DTI, and it looks at how much debt you pay each month versus how much income you bring in)
- Minimum down payment amount of 5% (or even as low as 3% for certain programs for low- to middle-income borrowers)
2. If a buyer meets the minimum requirements, they should be able to qualify for a conventional, conforming mortgage.
A few caveats:
- Each lender can have their own requirements on top of the Fannie and Freddie minimum requirements. For example, a lender can require a minimum credit score of 700 on a loan, as it goes above and beyond the Fannie and Freddie requirements. But that same lender can’t issue a conforming loan to a buyer with a 540 credit score, as that’s lower than the minimum Fannie and Freddie requirement.
