How to Get a Conventional Home Loan

By Jonita Davis

The conventional home loan is obtained through a good credit score, proven income and moderate down payment. Often seen as the old-fashioned way of getting a home, after the subprime mortgage crisis, conventional home loans are the best way to get a home.

Start a savings account for the down payment and closing costs associated with a conventional home loan. Lenders like to see a down payment of anywhere between 5 percent to 20 percent. Closing costs are usually between $5,000 and $10,000. Thus, for a $100,000 home, you should have $10,000 to $30,000 to secure the loan. Increase the amount saved to make yourself a more attractive borrower.

Save at least 6 months of living expenses in a separate account. This shows the bank that you are stable, capable of saving and, therefore, least likely to miss payments.

Get a copy of your credit report from all three credit bureaus. Trans Union, Equifax and Experian list different debts because creditors don't always report to all three companies. Read the report to look for errors, such as debts on your credit that aren't yours or that are misrepresented. Write the credit bureau to inform them of these errors.

Pay off old debts and pay down open, delinquent accounts. Lenders like to see that you have cleared up any debts within the last 2 to 7 years, depending on the lender. See the resources section for more information on paying older debts. Pay all of your current bills on time. Wait at least 60 days after contesting a debt or paying one off to apply for the loan. Request another copy of your credit report first.

Choose a lender. Look for one that gives you the best rates on a conventional home loan that fits your financial situation. Try to avoid adjustable rates if possible. You may want to begin with your own bank.

Gather paystubs and any other proof of income; financial statements if you are self employed; all bank statements, especially to the down payment /closing costs account and the living expenses account; and a copy of the updated credit report.

Start this process at least one year before you plan to get a conventional home loan to give yourself enough time to clean up your credit report and create substantial savings.

http://www.lenderva.com