How to Get a Conventional Loan

By Don Rafner

When you apply for a mortgage loan, you have two choices. You can apply for a government loan backed by the Federal Housing Administration (FHA) or Veterans Administration. Or, you can aim for a conventional loan supplied by a private lender or bank. If you attempt to qualify for a conventional loan, you'll need to provide plenty of paperwork that proves your income and debt levels. You'll also need a strong credit score to qualify for the lowest mortgage interest rates and loan fees.

Locate the necessary paperwork for the lender, which the lender uses to help them decide if you qualify for a conventional auto, personal, home or business loan. You'll usually need copies of your two most recent pay stubs from your employer, your two most recent tax returns and your checking and savings account information.

Make copies of this information. Fax, mail or email these copies to your lender.

Fill out your loan application. Every lender has a different application form, but most are two to six pages. You'll have to provide information such as your yearly income, your levels of debt and whether you've ever declared bankruptcy or have had any financial judgments filed against you. Send the form back to your lender either by fax, mail or email.

Take action to improve your credit score before applying for a conventional loan. Pay your bills on time and pay off as much of your revolving debt as possible. Both steps will gradually raise your credit score, and improve your chances of qualifying for a conventional loan.

Give your lender permission to run a credit check. Your lender runs a credit check to help them determine if you qualify for a conventional loan. By running this check, your lender will know if you have a history of paying bills on time and whether you've run up a significant amount of revolving debt.

If you don't want to take the steps to improve your credit score, you can apply for a sub-prime loan. You'll have to pay higher interest rates because lenders will consider you a risky borrower.

Sometimes it's better to wait until your credit score improves before applying for a conventional loan. You may still qualify for a loan with bad credit, but you'll certainly pay higher interest rates.

Before applying for a conventional loan, make sure to ask your lender for references. Call these references to see how capably the lender performed.

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