Utah Conventional Conforming Mortgage Loan

*updated as of January 2nd, 2025

Conventional mortgage loans are the most popular loan product in the United States. Unlike government loans (FHA, VA and USDA), conventional mortgages are issued by private lenders.

While not entirely accurate, “Conventional” is generally used to describe “conforming conventional mortgages”. This means that the specific mortgage meets Federal loan amount limits, and follows Fannie Mae and Freddie Mac mortgage guidelines of origination (and sometimes add on their own requirements).

You can find out the nationwide 2025 conforming loan limit values at this link.

For single family homes in Utah, most counties have a conforming loan limit of $806,500. The exception are two counties which are designated as high cost areas: Summit County and Wasatch County. If this is where you’re looking or purchase or refinance a home, then your loan limit is $1,149,825.

Even with the crazy home prices we’re seeing, most homeowners will purchase homes within the conforming loan limits. However, if you’re needing a higher loan amount, then you would need to apply for a Jumbo Conventional loan. This distinction is important because there are mortgage guidelines differences between a Conforming and a Jumbo loan, with Jumbo loans being more difficult to obtain, and less readily available.

Conventional Conforming Mortgage Eligibility

The borrowers most suited for a Conventional Conforming Mortgage are the ones with Good to Excellent credit, and reasonable debt.

This type of mortgage loan also allows for the purchase of vacation/second homes and/or investment properties – unlike government loans that are meant for primary residences only.

Down payment

The down payment options can be quite flexible in terms of primary residence purchases.

• No down payment for first time homebuyers with lower incomes can be eligible to pair these mortgages with city or county grants, or other down payment assistance loans or programs if and when available. A first time homebuyer is defined as someone that has not owned a property in the past 3 years, or has only owned it jointly with a spouse they are no longer married to.
• As low as 3% of the purchase price for borrowers at or under 80% of the area median income as determined by Fannie Mae/Freddie Mac
• 5% minimum down payment for everyone else looking to purchase a primary residence with a conforming conventional mortgage.

Second home purchases (vacation homes, not actual second properties owned) require a 10% down payment.

Investment properties require a minimum 20% down payment.

If a property has more than one unit (condo, town home, single family home), then the downpayment requirements may increase, or restrictions might exist depending on the occupancy intent. Please contact me for additional details on more complicated scenarios.

It’s important to know that the low down payment options are possible due to private mortgage insurance (PMI) companies lowering lender risk by providing the coverage needed to get a borrower to 20% equity. So if you make a 5% down payment, then the PMI company provides coverage for the remaining 15%.

Older borrowers may remember the high cost of PMI in the past, but these days the monthly premiums are a lot cheaper (especially with excellent credit). It often makes little sense to hold off on purchasing a home while trying to out-save home appreciation and inflation. If this is a concern to you, please email me at [email protected] and I’ll be happy to provide you with a sample quote, and help you decide on the best course of action.

Credit

The higher your credit scores, the cheaper your private mortgage insurance will be. That’s usually the deciding factor when it comes to comparing whether your should get a Conforming Conventional mortgage loan, or an FHA government backed loan.

These days 780 is considered excellent credit, but approvals can be granted for credit scores as low as 620, as long as there are enough compensating factors.

Compensating factors can be a large down payment, significant savings (even in the form of a 401k account that you don’t need to touch), or a low debt to income percentage.

Not having perfect credit doesn’t disqualify you from obtaining a mortgage approval. It just might require some preparation beforehand.

If you have any concerns that are holding you back from purchasing a home, please reach out. I’m happy to help you put together your own personal map to homeownership, regardless of what the starting point looks like. [email protected]

Income and Debt

Last but not least, your income and debt level will very much be major factors in your mortgage application.

You don’t need to pay off all your debt before applying to purchase a home. But you do need to make sure that the sum of your minimum monthly payments + the new mortgage loan don’t exceed 45% of your gross monthly income.

In the case of a primary residence purchase, conforming conventional loans will often allow the debt percentage to be as high as 49%ish, but that’s on a case by case basic.

If you want to know what your purchase power is, working with a good mortgage loan officer is crucial. Mortgage lenders have different criteria of calculating income, and it’s based on trends, continuity of income, and stability of income.

Some common pitfalls are:

• variable income such as overtime, bonus and commission needs a 1-2 year history of receipt before being considered stable; the amount used to qualify you will therefore be an average of your most recent 1 to 2 years, and not what your most recent pay stub shows
• working less than a 40h/week position also falls under “variable hourly income” which requires a 1 to 2 year history of receipt
• part time income needs at least a 1 year history of receipt
• working two full time jobs and using both those incomes to qualify requires a 2 year history
• self employment doesn’t go by gross income, rather by net taxable income after expenses
• employment gaps longer than 3 months may require you to be at your new job for at least 6 months

These are all normal roadblocks to be navigated during the mortgage loan process. Putting together good documentation can often clear what can seem like a dealbreaker, and a really good loan officer won’t hesitate to advocate for you.

As always, you can text me at 801-473-3154 to get in touch, or email me your scenario to [email protected]

Apply now, or keep reading if you need a deeper dive into the conventional conforming mortgage guidelines.

Mortgage Guideline Details

You might have concerns about specific guidelines, and how they might impact your approval odds.

Below are some of the main secondary market guidelines. Most lenders will follow them exactly, but some may have their own additional requirements. This is why you sometimes hear about one lender denying a file, and another approving it.

A good mortgage broker can help answer your questions, identify solutions, and pair you with a lender that can grant a needed exception.

Below I’ve addressed the following:

• self employment
• derogatory credit
• co-signed debt
• non-occupying co-borrowers
• gift funds
• non-arms length transactions
• interested party contributions

If you have questions that I haven’t covered, you can always e-mail them to me at [email protected]

Self Employment

Self employment can mean a few different things, but it’s generally the absence of a W2 form from an employer.

• If you have one or more companies paying you on a 1099-Misc form, then you are an independent contractor, and therefore self employed.
• If you own more than 25% of a business, you are considered self employed.

Here is where self employment gets tricky for some:

1. Length of self employment – usually two years are required, unless the borrower’s most recent filled federal and business tax return reflects a full 12 months of self employment, and documentation can be provided of experience in the same field of work, with comparable previous earnings; if a borrower has been self employed for at least 5 years, then only one year of personal and business tax returns is required.
2. Income – this is not the gross business income, rather the net income after deductions, averaged over one or two years of tax returns. There are specific ways in which mortgage lenders calculate cash-flow, and I’m happy to help you calculate those numbers if you want to provide me with copies of your tax returns. If you’re about to file your tax return and are unsure how the filing will affect you, please email me and we can run numbers beforehand. [email protected]
3. Stability of income. This one can be tricky because if two years of tax returns are required and your self employment income shows as declining from one year to another, a 25% or more decline can lead to an automatic denial.
4. Income source. If you have more than one business entity, each entity income will be calculated separately, and will need it’s own minimum 2 year history. So careful with changing business entities, or opening new ones.

Derogatory Credit

Because everyone messes up every now and then. Financial mismanagement has longer waiting periods, while extenuating circumstances can qualify for waivers and shorter waiting periods.

Definition of “Extenuating Circumstances”

Extenuating circumstances are nonrecurring events that are beyond the borrower’s control, and that result in a sudden, significant, and prolonged reduction in income, or a catastrophic increase in financial obligations.

The borrower must have re-established credit for two years after, as well as provide proper documentation and a letter of explanation evidencing the incident was not due to financial mismanagement. Examples:

• death of the primary wage earner
• long term illness or disability not covered by insurance
• prolonged loss of employment for reasons out of the borrower’s control (such as site closings or mergers).

Foreclosure

Having to foreclose on a home is a lender’s worst nightmare. It a lengthy and costly procedure for both parties involved, and it should be avoided whenever possible.

If you were unfortunate enough to experience a foreclosure on your home, the waiting period before becoming eligible for a conventional loan is as follows:

• 7 years for financial mismanagement, measured from the completion date of the foreclosure action as reported on the credit report, or other foreclosure documents provided by the borrower;
• 3 years with lenders that will make an exception under “extenuating circumstances”; maximum loan to value accepted is 90%, and only transactions on primary residences are allowed.

Bankruptcy

Chapter 7 or 11 waiting period:

• 4 years for financial mismanagement, measured from the discharge or dismissal date of the bankruptcy action.
• 2 years if extenuating circumstances can be documented, measured from the discharge or dismissal date of the bankruptcy action.

Chapter 13 waiting period:

A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:

• 2 years from the discharge date, or 4 years from the dismissal date

• extenuating circumstances: 2 years from discharge or dismissal

Multiple bankruptcies require a 5 year waiting period.

Pre-foreclosure/ Deed-in-lieu/ Short Sale

These transaction types are completed as alternatives to the foreclosure process.

A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer.

A pre-foreclosure sale or short sale is the sale of a property where the loan servicer approves a payoff of less than the total amount owed.

A charge-off of a mortgage account occurs when a creditor has determined that there is little (or no) likelihood that the mortgage debt will be collected.

• 4 year waiting period required, measured from the completion date of the above actions
• 2 year waiting period if extenuating circumstances can be documented.

 Past Due, Collection, and Charge-Off of Non-Mortgage Accounts

• past due accounts must be brought current
• on 1 unit primary residences, the borrower is not required to pay outstanding collections and charge-offs provided they do not threaten the 1st lien position
• on 2-4 unit, primary residences and second homes amounts exceeding $5,000 need to be paid prior or at closing
• on investment properties, individual account balances over $250, and accounts totaling more than $1,000 need to be paid prior or at closing.

Medical collection accounts are excluded and not required to be paid.

Judgements and Liens

• judgments, garnishments, and liens must be paid in full prior to or at closing (with documentation)

Mortgage Late Payments

• no more than one 30 day mortgage late payment in the past 12 months;
• no more than 2-30 day lates, or one 60 day late payment in the past 24 months.

The policy applies to all mortgage tradelines, including first liens, second liens, home improvement loans, HELOCs, and manufactured home loans.

Disputed Trade Lines

Disputed accounts can temporary boost credit scores if the disputed account is derogatory, therefore further analysis is needed.

• if the account does not belong to the borrower, written documentation must be obtained
• if it does belong to the borrower, the dispute must be removed before the loan can fund.

Co-Signed Debt

A borrower is normally considered responsible for the full payment on a co-signed debt, but there are exceptions.

Non-Mortgage debt

When the borrower is not the party who is actually repaying the debt, the lender may exclude the monthly payment from the borrower’s recurring monthly obligations. This policy applies whether or not the other party is obligated on the debt, but is not applicable if the other party is an interested party to the subject transaction (such as the seller or real estate agent).

Non-mortgage debts include installment loans, student loans, revolving accounts, lease payments, alimony, child support, and separate maintenance.

Mortgage debt

If the borrower is not the party who is actually repaying the debt, the lender may exclude the full monthly housing expense from the borrower’s recurring monthly obligations if:

1. The party making the payments is obligated on the mortgage debt,
2. There are no delinquencies in the most recent 12 months, and
3. The borrower is not using rental income from the applicable property to qualify.

The real estate associated with the property will still count against a borrower’s maximum financed real estate limit (10 for second homes or investment properties).

In order to exclude non-mortgage or mortgage debts, the lender must obtain the most recent 12 months’ canceled checks (or bank statements) from the other party making the payments, and there cannot be delinquent payments.

Non Occupant Co-Borrowers

A borrower is any applicant whose credit is used for qualifying purposes. “Co-borrower” is a term used to describe any borrower other than the borrower whose name appears first on the note.

Non-occupant borrowers are credit applicants who do not plan to occupy the subject property. They are allowed on primary residence purchases, and on cash-out refinances.

Restrictions apply if the non-occupant co-borrower is also an interested party to the transaction, such as a seller, builder or real estate agent.

Gift Funds

• Gifted funds from acceptable donors are permitted only on primary residence and second homes, not on investment properties.
• Must be accompanied by proper documentation (your loan officer can provide the standard gift letter form)
• Gifted equity is only allowed on primary residences.

Acceptable Donors. A gift can be provided by:

Non Arms Length Transactions

• A non-arms length transaction occurs when there is a business or personal relationship between the borrower and the builder or seller; it has to be disclosed, and it is only allowed on primary residences.
• It is not allowed on a short-sale when seller and buyer are related, and not allowed as a means to bail out the current owner from an existing delinquent mortgage.

Interested Party Contributions

Interested party contributions (IPCs) are costs that are normally the responsibility of the buyer, but that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property.

Examples of interested parties are:

• the property seller
• the builder/developer
• the real estate agent or broker
• an affiliate who may benefit from the sale of the property and/or the sale of the property at the highest price possible.

Interested Party Contributions cannot be used to make the borrower’s down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements.

Types of interested party contributions are:

• Financing Concessions: these are funds typically meant to be applied to the buyer’s customary closing costs, but can also be funds used to subsidize a temporary or permanent interest rate buydown. They can also include prepaid items (such as interest, real estate taxes, home insurance premiums of HOA fees)
• Sales concessions: may include financing concessions, but also non-realty items such as cash, furniture, automobiles, decorator allowances, moving costs, and other giveaways.

The interested party contribution limits on a conventional conforming mortgage are:

Primary residence or Vacation Home purchases

• 3% maximum if the buyer’s down payment is less than 10% of the purchase price
• 6% maximum is the buyer’s down payment is more 10% or more, but less than 25%
• 9% maximum if the buyer’s down payment is 25% or more

Investment properties

• 2% maximum regardless of the down payment amount

If you’re ready for your next home purchase, please fill out an online mortgage application and I’ll respond within 24h.

On request, I can offer mortgage loan pre-qualifications based on soft credit pulls (won’t impact your score), as well as preliminary numbers to give you an idea of your purchase power. Even if you’re not looking to purchase right away, there’s no reason to wait to apply. Get the facts and the numbers now, and your mortgage loan when you’re ready.