Conventional Loan Requirements for 2024 - NerdWallet (2024)

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Conventional Loan Requirements for 2024 - NerdWallet? ›

Conventional loans require a credit score of at least 620 but can allow for down payments as low as 3%. Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page.

In 2024, a buyer needs a credit score of 620 or higher for a conventional mortgage loan. This is a comparatively low rate, squarely in the middle of the “fair” score range. Scores of 670 or higher are considered “good.”

The national conforming loan limit for 2024 for a one-unit property is $766,550.

The minimum credit score for a conventional loan is typically 620. Lenders will look at your scores from the Big Three credit bureaus: Experian, TransUnion, and Equifax.

Your credit score might be the most important conventional mortgage requirement. If your score is not at least 620, you can't get approved. Your credit score also affects the mortgage rates lenders will offer you. The higher the score, the lower your rate.

Conventional Loan Appraisal Checklist

Wood-boring insects (termites), dampness, and abnormal settlement can affect the marketability off the property. Additions that do not have a required permit require the appraiser to comment on the work and assess the impact of the market value.

Conventional loans have more stringent requirements than government-backed mortgages, but that doesn't mean it's significantly harder for most borrowers to get approved for one. The better your credit and finances, the more likely you are to get approved.

Credit Score

For a $300,000 home, you'll likely need a good credit score: 740+: Best rates and terms. 700-739: Slightly higher rates. 660-699: Higher rates, may require larger down payment.

While a 20% down payment is often recommended, it's not always required. A lender will look at the big picture when evaluating your mortgage application. Depending on your specific situation, you can put down as little as 3% when taking out a conventional mortgage.

For a $500,000 home, you'll likely need a good to excellent credit score: 760+: Best rates and terms. 740-759: Slightly higher rates. 720-739: Higher rates, may require larger down payment.

Why would I be denied a conventional loan? ›

Reasons your mortgage application may be denied include a dip in your credit score, increased debt, paperwork errors, a low home appraisal and unverified cash deposits.

Homes with major condition issues, such as those that impact property's safety, structural integrity, or livability, often don't qualify for conventional financing.

How often does an underwriter deny a loan? A mortgage underwriter typically denies about 1 in 10 mortgage loan applications. A mortgage loan application can be denied for many reasons, including a borrower's low credit score, recent employment change or high debt-to-income ratio.

In its latest U.S. Economic Outlook, the Economics Group of Wells Fargo Bank puts the 30-year conventional mortgage rate at 6.4% in the third quarter of 2024, declining to 6.25% by the end of the year. Wells Fargo economists predict that the average rate will dip below 6% in the second quarter of 2025.

Typically, you should be able to qualify for them as long as you have a credit score of 620, which is why at 650, you'll likely get approved for a lot of conventional loans out there.

To recap, FHA's maximum qualifying debt ratios for borrowers in 2024 are 31% and 43%. This means the monthly housing payments should not exceed 31% of gross monthly income, while the total debt burden should not exceed 43% of monthly income.

You will not be able to qualify for a conventional loan with a credit score of 600: They require a minimum score of 620. However, there are other options to consider: FHA loans: Federal Housing Administration loans have more flexible qualifying standards.