What is typically required for a borrower to qualify for a conventional loan?

In order to qualify for a conventional loan, borrowers are often required to demonstrate a higher credit score, which indicates their creditworthiness and ability to repay the loan. A larger down payment is also typically favored, as it reduces the lender's risk and can lead to better loan terms for the borrower. Lenders generally look for credit scores of at least 620 or higher, although higher scores can unlock more favorable rates. Additionally, making a larger down payment, such as 10% or more, can impact the choice of loan and may help avoid private mortgage insurance (PMI), which is an extra cost for borrowers who put down less than 20%.

Other options lack completeness: while a minimum down payment of 20% is common, there are various loan programs that allow for lower down payments. A steady employment history is beneficial, but it is not the sole factor for qualifying. Finally, proof of income can encompass various forms, so limiting it to tax returns is too narrow.