As a mortgage professional, I would like to answer the question regarding the maximum loan-to-value (LTV) ratio on a conventional loan.
What is a Conventional Loan?
A conventional loan is a type of mortgage that is not guaranteed or insured by any government agency, such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA). The terms and conditions for a conventional loan are typically set by the lender and may vary depending on the borrower's creditworthiness, income, debt-to-income ratio, and other factors.
Maximum LTV on Conventional Loan
In general, the maximum LTV ratio on a conventional loan is 95%. This means that borrowers can finance up to 95% of the appraised value or purchase price of the property, whichever is lower. For example, if the appraised value of a property is $200,000, the maximum loan amount would be $190,000.
It's worth noting that the LTV ratio may be lower for certain types of properties or borrowers with less-than-perfect credit. In these cases, the lender may require a higher down payment or charge a higher interest rate to compensate for the increased risk.
Benefits of a Conventional Loan
A conventional loan offers several advantages over other types of mortgages, including:
Down Payment Requirements
While the maximum LTV ratio on a conventional loan is 95%, borrowers are typically required to make a down payment of at least 5% of the purchase price or appraised value, whichever is lower. For example, if the appraised value of a property is $200,000, the borrower would need to make a down payment of at least $10,000.
However, some lenders may require a higher down payment depending on the borrower's creditworthiness and other factors. It's important to shop around and compare offers from multiple lenders to find the best terms and rates for your situation.
Credit Score Requirements
To qualify for a conventional loan, borrowers typically need a credit score of at least 620. However, some lenders may require a higher score, such as 680 or above, depending on the borrower's income, debt-to-income ratio, and other factors.
Borrowers with a lower credit score may still be able to qualify for a conventional loan, but they may have to pay a higher interest rate or put down a larger down payment to compensate for the increased risk.
Closing Thoughts
In summary, the maximum LTV ratio on a conventional loan is 95%, but this may vary depending on the borrower's creditworthiness, income, and other factors. To qualify for a conventional loan, borrowers typically need a credit score of at least 620 and a down payment of at least 5% of the purchase price or appraised value.
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