Conventional Loan in PA: Homebuyer Requirements

Home buyer looking at their new homeA conventional loan is a mortgage not backed by a government entity, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Conventional loans are often called "conforming" loans because they conform to guidelines set by Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that purchase mortgage loans from lenders.

There are several benefits to obtaining a conventional loan in Pennsylvania. For one, borrowers can receive financing for up to 97% of the home's value, meaning less money will be paid out-of-pocket at closing. Additionally, conventional loans typically have lower interest rates than other types, such as FHA loans.

What is a Conventional Loan?

A conventional loan is a mortgage not backed by the federal government, and these loans are typically issued by private lenders such as banks, mortgage brokers, and credit unions. Conventional home loans can be either fixed-rate or adjustable-rate mortgages.

Fannie Mae and Freddie Mac are two of the most common sources of financing for conventional loans. Fannie Mae is a government-sponsored enterprise that provides liquidity to the mortgage market by buying and securitizing traditional loans, and Freddie Mac is a similar organization.

Conventional loans typically have higher interest rates than government-backed mortgages, such as FHA, USDA, or VA. However, they can still be a good option for borrowers with solid credit histories and sufficient income to make monthly payments.

Conventional mortgages often allow for more significant loan amounts and do not need an upfront mortgage insurance premium, unlike government-backed loans such as FHA, USDA, and VA mortgages.

Conventional loans require a down payment of 20% of the purchase price; however, private mortgage insurance is necessary if the down payment is less than 20%.

After reaching an equity threshold of 22%, private mortgage insurance is no longer required.

How to Get a Conventional Loan in PA

Choosing a conventional loan in Pennsylvania may be easier than you think, and many lenders offer attractive interest rates and flexible terms. Whether buying a home for the first time or looking to refinance, a conventional loan may be your best option.

It would help if you had a decent credit score to qualify for a conventional loan. You should also have a substantial down payment. A conventional loan may be used for purchasing a primary residence, a second home, or investment property. The down payment for a traditional loan is typically between three to 20 percent of the sales price.

Conventional Loan Requirements PA

There are a few specific requirements that borrowers need to meet to qualify for a conventional loan in Pennsylvania.

  1. First, borrowers must have a credit score of at least 620, the minimum credit score required by most conventional lenders.
  2. Second, borrowers need a down payment of at least 3% for an owner-occupied primary residence. The down payment can be your own money or gifted money from a family member or friend.
  3. Third, borrowers must have no more than a 45% debt-to-income ratio. Your monthly debt payments (including your proposed mortgage) should not exceed 45% of your monthly gross income.
  4. Fourth, borrowers need to have steady employment and income. Lenders typically want to see two years of employment history, although they may make exceptions for borrowers with solid credit scores and other factors.
  5. Fifth, borrowers should ideally have cash reserves equal to at least three months of their mortgage payment. This shows lenders that you have the financial resources to cover any unexpected expenses that may come up.

 As long as you have a good credit score, a down payment, and steady employment, you should be able to qualify for a conventional loan.

Conventional Loan Limits Pennsylvania

Whether you're looking to purchase a new home or refinance an existing one, it's essential to be aware of the conventional loan limits in Pennsylvania. These limits are not limited to the traditional single-family home but include 1 - 4 unit owner-occupied properties and condos.

The Federal Housing Finance Agency (FHFA) sets the lending limits each year, which sets the conforming loan limits for Fannie Mae and Freddie Mac, the two government-sponsored enterprises it regulates. See the maximum loan limits for your PA county, change the Limit Type to Fannie/Freddie, and choose your county.

Conventional Loan Programs

Whether you are a first-time homebuyer or an experienced buyer, there are various types of conventional Loans in Pennsylvania. These loans offer lower down payments, low-interest rates, and flexible mortgage terms. In addition, you can choose from fixed-rate loans and adjustable-rate mortgages.

You can also find a variety of programs for people with good credit. Most conventional loans require a credit score of at least 620, although slightly higher scores can be accepted. The average credit score for successful applicants is around 720.

Fannie Mae Standard Program - If you cannot meet the guidelines for HomeReady of the Conventional 97 programs, the standard program requires a minimum down payment of 5%—no income or area restrictions.

HomeReady - HomeReady Mortgage offers borrowers a 3% minimum down payment. Income limits of 80% of the area median income. No first-time home buyer requirement.

Conventional 97% - No income limits exist on the Conventional 97 loans. At least one borrower must be a first-time home buyer.

HomeStyle Renovation - The maximum loan-to-value (LTV), combined loan-to-value (CLTV), and home-cash-to-value (HCTLV) ratios for one-unit, primary dwelling, fixed-rate, purchase and restricted cash-out refinancing loans have been raised to 97% (3% down payment).

Another option is a non-conforming loan, also known as a jumbo loan. A non-conforming loan is used when you do not meet all of the guidelines for conventional loans.

Construction Loan - Single-Closing and Two-Closing transactions are the two forms of Construction-to-Permanent (C-to-P) financing that Fannie Mae offers to its customers better to serve the needs of the new construction market.

Freddie Mac

As Fannie Mae's competitor, the guidelines and loan products are mostly similar.

Conventional Loan Income Requirements

Fannie Mae and Freddie Mac do not have specific income requirements other than Fannie Mae's HomeReady program and Freddie Mac's Home Possible loan programs.

Instead, the income limits are established with a debt-to-income ratio (DTI) to evaluate a borrower's loan repayment ability. It's calculated by taking the borrower's monthly debt payments and dividing them by their gross monthly income.

Borrowers must also meet the following income requirements:
The monthly housing costs (mortgage principal and interest, property taxes, and insurance) must be less than 31% of the borrower's gross monthly income.

The total monthly debt payments (mortgage principal and interest, property taxes, insurance, and other recurring monthly debts) must be less than 43% of the borrower's gross monthly income.
The monthly debt payments and housing costs must be less than 50% of the borrower's gross monthly income.

Credit Score to Buy a House in PA

If you plan to buy a home in Pennsylvania, you'll need a credit score of at least 620 to qualify for a conventional loan.

However, if your credit score is below 620, you may still be able to get a conventional loan if you can provide proof of alternate credit sources. If your credit score is at least 620, you'll typically need to make a down payment of at least 3% of the home's purchase price.

However, if your credit score is below 620, you may still be able to get a conventional loan with a down payment as low as 10%.To get the best interest rate on a traditional loan, you'll need a credit score of 740 or higher. Read more

Conventional Loan Down Payment

For most people, a down payment on a conventional loan is the biggest hurdle to purchasing a home. Fortunately, there are several ways to get around this, including using Fannie Mae and Freddie Mac. 
Fannie Mae and Freddie Mac are government-backed lenders, which means they are willing to offer low-cost loans to people who don't have a sizeable down payment.

The required down payment on a conventional loan with either lender is only 3%. This means that even if you don't have much money saved up, you can still purchase a home using a conventional loan. And since the government backs these loans, you know you're getting a good deal.

Conventional Loan Mortgage Insurance

If you're shopping for a conventional home loan, you might wonder if you need to purchase mortgage insurance. Mortgage insurance is typically required on any home loan with less than a 20% down payment. Fannie Mae and Freddie Mac, the two government-backed conventional loan providers, each have their own rules and regulations for mortgage insurance.

Here's a general overview of what you need to know about conventional loan mortgage insurance:

  • If your down payment is less than 20%, you'll typically be required to purchase mortgage insurance.
  • Fannie Mae and Freddie Mac have rules and regulations regarding mortgage insurance.
  • Mortgage insurance is typically paid as a monthly premium in addition to your regular mortgage payment.
  • Mortgage insurance protects the lender in case you default on your loan.
  • Borrowers are required to pay MI until they have paid down their loan balance to 78% of the original purchase price or appraised value, whichever is less. The MI premium is usually added to the borrower's monthly mortgage payment.
  • The cost of mortgage insurance depends on several factors, including the loan amount, the term of the loan, and the loan-to-value (LTV) ratio. The LTV ratio is the loan amount divided by the property's appraised value or purchase price, whichever is less.

Conventional Loan Terms

A conventional loan's most common term is 30 years, but other options include 20, 25, 15, and 10 years. There are also adjustable-rate mortgages (ARM).

The length of the loan term will affect your monthly payments and the total amount of interest you pay over the life of the loan. A shorter time will result in higher monthly payments, but you will pay less interest overall. A longer-term will have lower monthly payments, but you will pay more interest over time. It would help if you chose a loan term based on your financial goals and ability to make monthly payments.

Conventional Loan Gift Funds Requirements

Regarding conventional loans, gift funds can be a great way to help with the down payment. However, there are some requirements that you need to be aware of before using gift funds.

First, the donor of the gift funds must be a close relative, such as a parent or grandparent. The funds must also be given with no expectation of repayment. Anyone connected to you through blood, marriage, adoption, or legal guardianship is regarded as a relative, a spouse, a child, or a dependent. Domestic partners and engaged couples may also contribute funds for a down payment.

Next, you will need to provide a gift letter to the lender. This letter should state who the donor is, how much money is being given, and that there is no expectation of repayment. The lender will provide you with an acceptable gift letter.

Finally, the gift funds must be deposited into your account before closing, and the donor must provide a bank statement or other documentation showing the funds have been deposited.

If you meet all the requirements above, gift funds can be a great way to help with your down payment and closing costs on a conventional loan. Just follow the guidelines and provide the necessary documentation to the lender.

Conventional Loan Cosigner

Generally, a cosigner on a conventional loan in Pennsylvania is an individual who is not the primary occupant. The cosigner agrees to repay the mortgage if the prior occupant defaults on loan. The cosigner may or may not receive any rights to the property. However, if the cosigner defaults on the loan, the foreclosure will appear on the cosigner's credit report.

In most cases, the cosigner must be a U.S. citizen, a lawful non-permanent resident, and have a credit score of at least 620. The cosigner must have a stable income, a low debt-to-income ratio, and can afford the mortgage payments.

A cosigner may be a relative, a spouse, or a close friend. A close friend may be able to help a borrower get a house, while a relative may be more likely to contribute to the mortgage payments.
A cosigner's credit score will determine if they can qualify for a loan. However, a lender may ask for additional information, such as income and assets, before offering a loan.

A cosigner can positively affect a borrower's credit, but only if the cosigner is responsible. If a cosigner has late payments on their credit report, it will negatively impact the cosigner's credit score. The FTC advises consumers to do their homework before cosigning a mortgage.

Conventional Loan Seller Concessions

Buying a home can be expensive, and if you have limited funds, you can save on your closing costs by asking for seller concessions. These are payments the seller agrees to make for you at closing. The number of seller concessions you receive will depend on the home you purchase and your loan.

Seller concessions can include paying off your buyer's credit balances to paying your home inspection fees. These can help you reduce the cost of your purchase and make your offer more attractive to buyers.

Seller concessions are essential in many home purchases and are handy for first-time home buyers. However, you must remember that a seller must not agree to your request. If you ask for seller concessions and the seller declines, you may be stuck with a less-than-perfect offer.

Seller concessions are also known as seller assistance and seller assistance.
Seller concessions are not mandatory; you can counter an offer with a different amount. However, if you ask for seller concessions, you must be prepared for negotiations to go back and forth until you have reached an agreement. Read more

Seller Concession Limits

Down payment -
3% to 9% (3% seller concession limit
10% to 25% (6%)
26% or greater (9%)

Pros and cons of conventional loans


  • No upfront mortgage insurance
  • Mortgage insurance can be removed with 20% to 22% equity
  • Flexible cosigner requirements
  • Higher loan limits with most U.S. counties by
  • Eligible for second homes and 1-4 unit investment properties
  • 3% down payment for eligible borrowers
  • Easier appraisal requirements
  • Multiple conventional loans allowed


  • Higher interest rates
  • Higher credit score and income requirements (620 minimum)
  • Limited seller concession (3%, 6%, 9%)
  • Not as easy to qualify for as some other loans
  • Monthly mortgage insurance is higher than FHA loans and USDA


If you're in the market for a mortgage, it's essential to understand the terms and conditions of conventional loans to make an informed decision. These loans offer a lot of flexibility regarding loan amount and interest rate, but there are limits on how much you can borrow. To qualify for a conventional loan, you'll need a good credit score and demonstrate your ability to make monthly payments.

Working with a lender specializing in this loan program can help streamline the process of securing a home loan and help ensure that you're taking advantage of the best possible terms and rates. Whether you're a first-time homebuyer or a seasoned investor, a conventional mortgage loan can be a great way to finance your purchase and achieve your homeownership goals.


Recommended Reading
Conforming Loan Limits in PA 2023
HomeOne Loan Program
PHFA: HFA Preferred™ program
PHFA: Keystone Home Loan Program
Conventional 97 loan: 3% down payment

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