Conventional loan requirements: credit, DTI and down payment

This guide focuses on conforming conventional loans evaluated under Fannie Mae or Freddie Mac frameworks. Conventional also includes nonconforming financing, such as jumbo loans, whose requirements are set by the lender or investor. Even within conforming lending, an automated underwriting recommendation is not the same as a universal public checklist.

Fannie Mae’s Desktop Underwriter documentation describes interacting risk factors that include loan-to-value, liquid reserves, loan purpose, term, amortization type, occupancy, debt-to-income ratio, housing expense, property type, first-time-buyer status, and variable income. (Fannie Mae Selling Guide B3-2-03) That is the useful mental model: changing one input can alter how the rest of the file is evaluated. Freddie Mac publishes its own guide and uses its own automated system, so details should not be assumed identical.

Sources: (Fannie Mae B3-5.1-01), (DU credit update), (DTI B3-6-02), (97% options), (income B3-3.1-01), (reserves B3-4.1-01), (occupancy B2-1.1-01).

A credit review considers more than a score: payment history, recent credit events, account balances, use of revolving credit, and the depth and age of the file can matter. Automated underwriting systems may not use a single agency-level score floor for every eligible submission, while mortgage insurance, specific products, manual underwriting, and lenders may still impose score requirements.

Debt-to-income ratio compares qualifying monthly obligations with qualifying income. How an obligation or income source is counted depends on current guidelines and documentation. Fannie Mae’s DTI guidance distinguishes automated from manual underwriting and contains transaction-specific exceptions, so a number found online should not be treated as a promise that a file will pass or fail. (Fannie Mae Selling Guide B3-6-02) Individual lenders may also apply stricter requirements of their own, sometimes called overlays.

Removing DU's score floor did not remove credit review or make low scores automatic approvals. Fannie Mae still requires credit scores for most loans; manual rules remain separate. Ask which underwriting system is being used.

The lender must determine that income used to qualify is eligible, documentable, and reasonably expected to continue under the applicable program. A salaried employee, a borrower with commissions, a self-employed owner, and someone receiving retirement or rental income should not expect identical documentation.

Common requests can include pay statements, W-2s, tax documents, account statements, employment verification, and explanations for material changes. The exact period and documents vary. Automated verification may reduce paperwork in some files, while variable or self-employed income may require a deeper review. Submit sensitive documents only through the lender’s verified secure application system—not through an ordinary contact form.

Funds needed at closing and reserves remaining afterward are related but distinct. The lender may need to verify the source and availability of down payment and closing funds. Gift funds and other sources can be eligible in defined circumstances, but the rules and documentation depend on the program, occupancy, and transaction.

Fannie Mae defines reserves as eligible liquid or near-liquid assets available after closing, commonly expressed in months of the qualifying housing expense. Requirements are not one fixed amount: automated findings and facts such as the transaction, occupancy, number of units, and other financed properties can change what is expected; the required amount, if any, comes from the automated findings or the applicable eligibility matrix rather than one universal figure. (Fannie Mae Selling Guide B3-4.1-01)

A one-unit primary residence is reviewed differently from a second home, investment property, multi-unit home, condominium, cooperative, or manufactured home. Occupancy affects eligibility and can affect down payment, reserves, documentation, and mortgage-insurance treatment. Property type can add collateral or project-level review beyond the borrower’s finances.

State the intended occupancy and property type accurately at the start. For a condominium, ask early whether project review is required and what documents must come from the association. For a multi-unit or income-producing property, ask how any proposed rental income may be documented and treated.

Not every conventional loan follows the same valuation process. Depending on the transaction, property, data, and underwriting findings, a file may require an appraisal or may be eligible for Fannie Mae value acceptance or value acceptance plus property data. Eligibility is conditional; it is not something a borrower or lender can promise before the file is evaluated. (Fannie Mae Selling Guide B4-1.4-10)

Under Fannie Mae’s value acceptance + property data option, an appraisal is not ordered, but interior and exterior property data must still be collected to verify property eligibility before closing. (Fannie Mae Selling Guide B4-1.4-11) Freddie Mac has its own valuation options with separate eligibility rules.

The value used for underwriting affects loan-to-value and can therefore affect mortgage insurance, cash needed, and eligibility. Property condition or project-review issues can also matter independently of the value.

1. Identify purchase or refinance, intended occupancy, property type, county, and estimated loan amount.
2. Review credit reports for accuracy without assuming a score alone determines the result.
3. List income sources and recurring obligations, noting which items may need special documentation.
4. Separate funds needed for closing from assets you intend to retain as reserves.
5. Keep account activity easy to document and ask before moving large sums between accounts.
6. Provide sensitive financial documents only through an approved secure application channel, not this planning request.

For an early planning view, use the DTI calculator with your own assumptions and the county loan-limit lookup. Neither tool makes an underwriting decision.

• Treating a single score or DTI number from a generic article as a universal approval threshold.
• Assuming every conventional loan is conforming or that jumbo requirements match agency requirements.
• Draining reserves to reach a down-payment target without comparing the whole file.
• Moving or depositing funds without keeping a clear documentation trail.
• Assuming every property receives the same appraisal or project-review process.
• Sending sensitive financial documents through an ordinary contact form instead of the secure application.

• Which program and underwriting method are you evaluating for my file?
• Are there lender or mortgage-insurance requirements beyond the agency guidance?
• How are my income sources and monthly obligations being counted?
• What funds must be verified for closing, and what reserves are expected afterward?
• What property, project, occupancy, or valuation review applies here?
• Which factor currently constrains the scenario, and what change would actually address it?