Module 2: Loan Products

Conventional loans are the backbone of the purchase market. Not government-backed — they meet Fannie Mae or Freddie Mac guidelines (conforming) or private investor guidelines (non-conforming/jumbo). Key Conforming Guidelines Minimum credit score: typically 620. Maximum DTI: 45–50% with compensating factors and AUS. Down payment: 3% minimum for first-time buyers via specific programs, 5% standard. PMI required if LTV > 80%. Private Mortgage Insurance (PMI) Required when a borrower puts down less than 20%. Protects the lender — not the borrower — in the event of default. Types: Borrower-paid monthly (BPMI, cancellable at 80% LTV), Lender-paid (LPMI, reflected in a higher rate, cannot be cancelled), Single-premium (full PMI cost paid upfront), or Split-premium (combination). PMI rates vary by LTV, credit score, and property type — typically 0.40–0.80% annually at 95% LTV. Sales Insight Conventional is often the right answer when the borrower has good credit, reasonable down payment, and a standard income profile. When they do not — government-backed products serve. Always run the total cost of ownership comparison, not just the rate.