California Conventional Loans

Conventional loans are not underwritten by a federal agency but are insured by private investors. Borrower qualification for a conventional loan is more stringent than for FHA or VA loans. A buyer's maximum house payment (PITI) for a conventional loan is generally 25 to 28 percent of gross monthly income. Total debts cannot exceed 33 to 36 percent, which includes the mortgage payment.

Historically, the loan-to-value ratio (LTV) on a conventional loan has been 80% or less of the value of the property, which is quite a bit lower than FHA and VA loans. FHA insures loans up to 97 percent and VA loans insures up to 100 percent, requiring little or no money down.

For example: If a property is valued at $100,000 secured by a $80,000 loan then the LTV is 80 percent.

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