Conventional Loan
A conventional loan is the most standard and widely available type of mortgage.
A conventional loan offers flexibility and is widely used for buying various types of properties, including primary residences, second homes, and investment properties.
What is a Conventional Loan?
A conventional loan is a type of mortgage that isn’t insured or guaranteed by the federal government.
Instead, these loans are underwritten according to guidelines established by Fannie Mae and Freddie Mac. Government-sponsored enterprises that purchase, guarantee, and securitize mortgage loans.Because these entities set the standards for what constitutes a conforming loan; borrowers benefit from streamlined qualification criteria, competitive interest rates, and a wide array of term options.
Unlike FHA or VA loans, which may require mortgage insurance or specific service requirements, a conventional loan offers flexibility that can suit a variety of financial profiles.
There’s a lot to think about when buying a house – and it’s normal to have questions, especially if you are a first time home buyer.
Maybe you want to change your term or lower your payment or payoff your loan faster. A rate and term mortgage could be your key to both.
Finding a great home loan involves careful consideration of your needs, finances and history. We are here to guide you.
Frequently Asked Questions
Opting for a conventional mortgage loan with Fannie Mae and Freddie Mac comes with several distinct advantages.
One of the most significant benefits is the potential for lower mortgage insurance costs. Unlike FHA loans that require mortgage insurance premiums for the life of the loan, conventional mortgages typically only require Private Mortgage Insurance (PMI) until equity reaches 20%. Once you attain this equity threshold, you can request to have PMI removed, effectively lowering your monthly payment.
Another key benefit is greater flexibility in property types and loan structures. Conforming conventional loans allow financing for primary residences, second homes, and investment properties, whereas some government-insured loans limit usage to owner-occupied homes.
Qualifying for a conventional home loan backed by Fannie Mae and Freddie Mac hinges on several core criteria: credit score, debt-to-income ratio (DTI), down payment, and documentation of income and assets.
Typically, borrowers need a minimum credit score of 620, though those with scores above 740 can often secure the most competitive conventional loan rates.
Your DTI—calculated by dividing monthly debt payments by gross monthly income—should generally stay under 45%, though exceptions may apply for borrowers with strong compensating factors.
Down payment requirements for conventional loans begin as low as 3% for eligible first-time homebuyers, but putting down 20% or more eliminates the need for PMI.
Documenting stable employment, two years of consistent income, and sufficient reserves further strengthens your application.
Fannie Mae and Freddie Mac also review your assets, such as savings, investments, and retirement accounts, to ensure you have funds for closing costs and potential rate increases should you choose an adjustable-rate mortgage.
Meeting these eligibility requirements positions you to secure a conventional loan with favorable terms and set you on the path toward homeownership.
The qualifying guidelines for a renovation loan are the same guidelines for the specific loan program.Â
Mortgage insurance is a requirement for conventional loans with down payments below 20%.
Known as Private Mortgage Insurance (PMI), it protects lenders in case of borrower default.
PMI costs range from 0.15% to 1.5% of the original loan amount annually, depending on your credit score and down payment size.
When exploring mortgage options, it’s essential to compare conventional home loans to government-backed alternatives like FHA, VA, and USDA loans.
FHAÂ loans may accept lower credit scores but require mortgage insurance premiums for the life of the loan.
VAÂ loans provide no-down-payment options for eligible veterans but come with funding fees.
USDAÂ loans offer low rates for rural properties but limit eligible locations.
In contrast, a conforming conventional loan typically delivers competitive interest rates for borrowers with strong credit and allows PMI cancellation.
Conventional loans also permit financing of second homes and investment properties—something many government loans prohibit.
By weighing credit requirements, down payment needs, and property eligibility across these loan types, you can choose the mortgage product that best fits your financial situation and homeownership aspirations.
We have the experience, the social track record, and access to the right resources to get loans done.
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Whether you are buying a new home, getting cash from your home’s equity, seeking a more affordable payment, or want to pay off your home loan sooner, our mortgage professionals explain your options simply and clearly — and offer you competitive rates and terms to help you save.
Our mission is to help give you the smartest path for homeownership, regardless of your starting point.
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1. Complete Your Application
Applicants can start online or over the phone to determine affordability.
2. Become a Certified Home Buyer
Once the loan application is received, your loan officer will review your loan options. Â
3. Time for Processing
A processor verifies information, orders the appraisal, title report, and homeowners insurance.Â
4. Closing on Your New Home
Once the loan is cleared to close, the loan documents are sent to the title company for signing.Â