Conventional Loans
Conventional loans typically have better rates, terms and/or lower fees than other types of loans. Ideal for borrowers with good credit and traditional income.
What Are Conventional Loans?
Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, USDA Loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Typically, conventional loans have better rates, terms and/or lower fees than other types of loans. However, conventional loans typically require a borrower to have good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 5-20% and reliable monthly income. Conventional loans are ideal for borrowers with excellent credit and at least a 5% down payment.
Why Choose a Conventional Loan?
- Competitive Interest Rates: Conventional loans often offer lower rates than government-backed loans for qualified borrowers.
- Flexible Property Options: Finance primary residences, vacation homes, and investment properties with a single loan type.
- No Upfront Mortgage Insurance: Unlike FHA loans, conventional loans don't require upfront mortgage insurance premiums when you put down 20% or more.
- Faster Equity Building: With various term options from 10 to 30 years, you can choose how quickly you build equity and pay off your home.
- Lower Overall Costs: Less restrictive guidelines mean potentially lower fees and the ability to cancel PMI once you reach 20% equity.
What are the Conventional Down Payment Requirements?
For Purchase transactions Conventional Loans require the home-buyer to put down at least 5% - 20% of the purchase price of the home. For a Refinance transaction, most lenders require at least 10% equity in the property.
What types of property are eligible?
Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4 family residences. A conventional loan can also be used to finance a primary residence, second home and investment property.
Key Features of Conventional Loans
Not Government-Insured
Unlike FHA, VA, or USDA loans, but meet Fannie Mae/Freddie Mac guidelines
Better Rates & Terms
Typically lower rates and fees than other loan types
5% Minimum Down Payment
For qualified borrowers with good credit
Flexible Property Types
Primary residence, second home, or investment property
Frequently Asked Questions
Conventional loans are not insured by the government, while FHA, VA, and USDA loans are government-backed. Conventional loans typically offer better rates and terms but have stricter qualification requirements regarding credit score and down payment.
Yes, one of the benefits of conventional loans is that PMI can be removed once you reach 20% equity in your home. You can request PMI removal once you reach 20% equity, and it's automatically removed when you reach 22% equity.
Not necessarily. In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the lender. Furthermore, because mortgage brokers deal with multiple lenders -- in a typical case, 25 to 30, sometimes more -- they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment, and so on.
Looking for a Conventional Loan?
Our mortgage experts are ready to help you find the perfect conventional loan option for your needs.