Conventional Home Loans

Conventional Mortgage Loans

Conventional or conforming loans refer to most mortgages not backed by the federal government. These loans follow the terms and conditions set by Fannie Mae and Freddie Mac, government-sponsored institutions that are the largest purchasers of mortgages in the United States.

A conventional mortgage comes with stricter approval standards than government loans, so it’s generally best for borrowers that have a higher credit score, stable employment and income, and a debt-to-income ratio of less than 45%.

A common misconception about conventional mortgages is that a 20% down payment is required. However, down payment requirements may vary based on your situation. A lower down payment of 3% is possible in combination with paying for private mortgage insurance (PMI), which is included in your monthly mortgage payment.

Why Choose a Conventional Loan?

A conventional loan could be your best bet for a mortgage if you’re a borrower with higher credit. By having a higher credit score, you may be able to take advantage of additional conventional loan benefits,  like competitive pricing, no mortgage insurance if you put at least 20% down, or the option of a lower down payment in combination with mortgage insurance.

What Are the Benefits of Conventional Loans?

  • Competitive pricing
  • No prepayment penalty ever
  • No mortgage insurance option
  • Up to 45% debt-to-income ratio
  • Allows for 3% seller paid closing costs

What Are the Waiting Periods After a Hardship?

  • 4 Years from Foreclosure or Short Sale
  • 4 Years from Discharge of Chapter 7 Bankruptcy
  • 2 Year from Discharge of Chapter 14 Bankruptcy

What Are the Most Common Conventional Loan Programs?

Conventional Purchase
  • Loan amounts up to $647,000 in low cost areas: $947,800 in high cost areas
  • 3%, 5%, 10%, or 20% or more down
  • Do not need to be a first time buyer
  • Available with or without mortgage insurance
Conventional Refinance
  • Competitive interest rates
  • Loan amounts up to $647,000 in low cost areas; $947,800 in high cost areas
  • 30yr, 25yr, 20yr, 15yr, or 10yr
  • Fixed or adjustable rates available
Conventional Cash Out
  • Up to 80% LTV
  • Competitive interest rates
  • Payoff a 2nd mortgage or HELOC
  • Cashout to pay off high interest debt