Conventional Loans

Conventional loans are a popular type of mortgage loan. Most borrowers assume you need perfect credit or a 20% down payment to get approved, but that’s not the case. They are easier to get than most people realize.

Conventional financing offers attractive rates and terms on loans that aren’t government-insured but are sold to government entities, such as Fannie Mae and Freddie Mac, so they have certain requirements.

Borrowers can use conventional financing for purchases and refinances on owner-occupied and non-owner-occupied homes. Conventional loans are available as fixed and adjustable-rate loans and conforming or non-conforming loans.

Conforming vs. Non-Conforming Loans

Conforming conventional loans are those that meet conforming loan limit guidelines. For example, the limits for 2022 are $647,200, and for 2023, they increase to $715,000.

Any loan amounts above these limits are non-conforming. This means they can’t be sold to Fannie Mae or Freddie Mac and must be funded and held by a private lender.

Qualifying for Conventional Loans

To qualify for a conventional loan, you must meet some basic requirements, including:

• A credit score of 620+
• A down payment of 3% for first-time buyers and 5% for subsequent buyers
• A debt-to-income ratio of 36% – 43%
• Verifiable income and employment
• Verifiable assets for the down payment and closing costs

Conventional Loans and Private Mortgage Insurance

You’ve likely heard the term PMI when talking about mortgage loans. Conventional borrowers pay Private Mortgage Insurance when they put down less than 20% on a home.

Here’s the good news.

PMI doesn’t last for the entire loan term. However, once you pay the loan balance below 80% of the home’s value, you can cancel PMI and keep the same loan.

Advantages of Conventional Loans

Each loan program has advantages, so here’s why you should consider a conventional loan.

• Competitive interest rates – Conventional loans have some of the most competitive interest rates because of the stricter qualifying requirements.

• Higher loan limits – Conventional loans have higher loan limits than government-backed financing options, especially in low-cost areas. Government-backed loan limits are based on the average home price in the area.

• More term options – Conventional loans are available as fixed-rate or adjustable-rate terms and in terms from 10 – 30 years.

• Available on owner and non-owner-occupied properties – Conventional financing is an option for borrowers looking for a home to live in, a vacation property, or an investment home. You can also hold multiple conventional loans at one time if you prove you can afford them.

How to get Started

Contact us today if you think you’re a good candidate for a conventional loan. Submit your request for a quote, and we’ll get back to you as quickly as possible.

We’ll review your options and help you understand how each loan has different implications for your purchase. We can discuss different loan options, down payments, and even interest rates to help you make the best choice.