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Conventional Loans: Flexible Financing for Qualified Buyers

Good credit and stable income? Conventional loans offer competitive rates, flexible terms, and down payments as low as 3%.

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What is a Conventional Loan?

Conventional loans are mortgages that aren't backed by a government agency (like FHA, VA, or USDA). They follow guidelines set by Fannie Mae and Freddie Mac and are offered by private lenders.

Conventional loans are the most common mortgage type in the U.S. and offer flexibility in terms, down payments, and property types.

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Key Features

Conventional Loan Features

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Down Payment

    • As low as 3% for qualified first-time buyers; typically 5–20% for others; 20%+ avoids PMI.

Credit Score

  • Minimum 620; best pricing usually starts at 740+, and higher scores mean lower rates.

Loan Limits

  • Up to $766,550 in most areas for 2024; higher in high-cost counties; amounts above become Jumbo loans.

PMI Requirements

Required when down payment is under 20%; removable at 20% equity; cost varies by credit and down payment.

Property Types

Eligible for primary residences, second homes, and investment properties across single-family, condos, townhomes, and multi-units; more flexible than government loans.

Loan Terms

Choose from 30-year fixed, 15-year fixed, 20-year, 10-year, and ARM options.

Is a Conventional Loan Right for You?

Good fit if you:
‍
✓ Have a credit score of 620+ (preferably 740+)
✓ Can make a down payment of 3-20%
✓ Have stable income and employment history
✓ Want flexibility in property type and loan terms
✓ Want to avoid government loan restrictions
✓ Plan to build equity and potentially remove PMI


Might not be the best fit if:

  • Your credit score is below 620 (consider FHA)
  • You have little to no down payment savings (consider VA or USDA if eligible)
  • You have recent credit challenges (FHA may be more flexible)
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Types of Conventional Loans

Conforming Loans

What It Is: Loans that meet Fannie Mae/Freddie Mac limits and guidelines
Loan Limit: Up to $766,550 (varies by county)
Best For: Most buyers in typical markets

Non-Conforming (Jumbo) Loans

What It Is: Loans above conforming limits for high-value properties
‍Loan Limit: No maximum
‍Best For: Luxury homes or high-cost areas

Understanding Private Mortgage Insurance (PMI)

 If you put down less than 20%, you'll pay PMI, typically 0.5-1% of your loan amount annually, divided into monthly payments. Unlike FHA's MIP, conventional PMI can be removed once you reach 20% equity through payments or home appreciation.

Example:
$300,000 loan × 0.8% PMI = $2,400/year = $200/month

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Conventional Loan Requirements

Credit Score

  • Minimum: 620
  • Best rates: 740+
  • Recent credit challenges may require higher scores

Down Payment

  • Minimum: 3% (first-time buyers)
  • Typical: 5-20%
  • 20%+ to avoid PMI

Debt-to-Income Ratio (DTI)

  • Maximum: 43-50% (varies)
  • Lower DTI improves approval
  • Includes all monthly debts + new mortgage

Property Appraisal

  • Home must appraise at or above purchase price
  • Appraisal ensures property value supports loan amount

Income & Employment

  • Stable employment history (2+ years preferred)
  • Verifiable income through pay stubs, W-2s, tax returns
  • Self-employed: 2 years of tax returns required

How to Apply for a Conventional Loan

Step 1

Get Pre-Approved

We'll review your credit, income, and assets to determine how much you can borrow.

Step 2

Find Your Home

Shop with confidence knowing your budget and pre-approval status.

Step 3

Submit Full Application

Provide detailed financial documentation for underwriting.

Step 4

Appraisal & Underwriting

We'll order an appraisal and review all documents for final approval.

Step 5

Clear to Close

Once underwriting approves, you'll receive final loan documents.

Step 6

Closing

Sign documents, pay closing costs, and get your keys! Typically 30-45 days from application to closing

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Conventional Loan FAQs

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Yes! Conventional loans allow investment properties, though you'll need a larger down payment (typically 15-25%) and may face higher rates.

You can request PMI removal once you reach 20% equity. It automatically terminates at 22% equity if you're current on payments.

Yes, conventional loans allow gift funds from family members, though you may need to contribute some of your own funds.

Self-employed borrowers can qualify with 2 years of tax returns showing stable or increasing income.

Yes, some state and local programs offer down payment assistance. Ask us about programs in your area.

Yes, though you'll get better rates with 680+ and the best rates with 740+.

Ready to Explore Conventional Financing?

Get pre-approved and see exactly what you qualify for.

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