Conventional Loans

A conventional loan is a mortgage not backed by FHA, VA, or USDA. Instead, it follows standards set by Fannie Mae and Freddie Mac—giving qualified borrowers access to competitive rates, flexible terms, and down payments as low as 3%.

These loans can be used for primary homes, second homes, and investment properties, offering greater flexibility than many government-insured programs.

Whether you’re buying a home or refinancing to improve your long-term financial outlook, a conventional mortgage is one of the most popular and cost-effective loan options available today.

Benefits of a Conventional Loan

✔ Low Interest Rates
Borrowers with strong credit often receive some of the most competitive rates available.

✔ Down Payments as Low as 3%
Eligible first-time or income-qualified buyers can purchase with minimal upfront cost.

✔ PMI Can Be Removed
Private mortgage insurance drops off once you reach 20% equity.

✔ Flexible Loan Terms
Choose from fixed-rate or adjustable-rate mortgages including 10-, 15-, 20-, and 30-year options.

✔ Wider Property Eligibility
Primary homes, second homes, condos, and many investment properties are eligible.

✔ No Upfront Mortgage Insurance Fees
Unlike FHA loans, conventional mortgages don’t require an upfront premium.

✔ Higher Loan Limits Available
High-balance and jumbo conventional options offer expanded purchasing power.

✔ Ideal for Well-Qualified Borrowers
Lower long-term costs for buyers with strong credit, stable income, and solid financial history.

Conventional Loan Eligibility Requirements

Most borrowers will need the following to qualify:

1. Strong Payment History

Consistent, on-time payments on existing debts.

2. Acceptable Credit & Income

A 620+ score is common, and stronger credit unlocks better pricing.

3. Adequate Down Payment

Typically 3%–20% depending on eligibility and loan structure.

4. Verification Documents

Pay stubs, bank statements, W-2s, or tax returns.

5. Home Appraisal

An updated appraisal verifies value and supports loan approval.

Types of Conventional Loans

Conforming Loans

Meet FHFA county loan limits and align with Fannie Mae/Freddie Mac standards.

High-Balance Conventional Loans

For borrowers in higher-cost areas qualifying for elevated loan limits.

Jumbo Conventional Loans

Non-conforming mortgages above local loan limits with expanded requirements.

Fixed-Rate Conventional Loans

Stable interest rate and payment for the entire loan term.

Adjustable-Rate Mortgages (ARM)

Lower initial rate for borrowers planning to move or refinance sooner.

Understanding how conventional loans compare to other major mortgage programs helps you choose the best option for your goals.

Conventional Refinancing

Lower your payment, reduce your rate, or remove mortgage insurance.

Conventional Loans vs Other Loan Types

Conventional vs FHA Loans

Conventional PMI can be removed at 20% equity, while FHA MIP often lasts longer.
FHA offers easier credit and lower down payment requirements.
Conventional usually costs less long-term for borrowers with strong credit.

Conventional vs VA Loans

VA offers zero down and no monthly mortgage insurance, but only to eligible veterans and service members.
Conventional is available to all borrowers and supports second homes and rentals.
For eligible veterans, VA may offer lower upfront costs; for others, conventional is the better fit.

Conventional vs USDA Loans

USDA requires rural eligibility and income caps.
Conventional has no geographic restrictions and allows more property types.
USDA includes guarantee fees, while PMI on conventional loans can be removed.

Conventional vs Jumbo Loans

Jumbo loans exceed conforming limits and have stricter guidelines.
Conventional loans within the limits typically qualify for better pricing.
High-balance options bridge the gap for borrowers in expensive markets.

Which Loan Type Is Best?

It depends on your credit, income, down payment, location, and long-term goals. For many borrowers with solid financials, a conventional loan delivers the strongest long-term value.

How the Conventional Loan Process Works

Step 1: Review Your Goals

We analyze your credit, finances, and property type to identify your best loan options.

Step 2: Choose Your Loan Structure

Select the right rate type, loan term, and down payment strategy.

Step 3: Provide Documentation

Submit income, asset, and employment information to confirm your eligibility.

Step 4: Appraisal & Underwriting

Your home is evaluated and your file moves through underwriting for final approval.

Step 5: Close on Your Loan

Sign final paperwork and secure your new mortgage.

Who Should Consider a Conventional Loan?

A conventional loan may be right for you if you:

Have good to excellent credit
Want the ability to remove PMI
Prefer flexible loan terms
Are buying a second home or investment property
Want competitive rates based on credit strength
Are refinancing from FHA or another loan type

Conventional Loan FAQs

How much do I need for a down payment?

Down payments start at 3% for qualifying buyers.

What credit score is required?

Most programs require a minimum score of 620.

Can PMI be removed?

Yes—once you reach 20% equity.

Are conventional loans good for refinancing?

Yes. Many homeowners refinance into a conventional loan to remove PMI or improve their rate.

Can I use a conventional loan for an investment property?

Yes. Conventional mortgages allow financing for second homes and rentals.

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What Is a Conventional Loan?