Conventional Loans
(Fannie Mae and Freddie Mac)

Conventional Loans

  • As Low as 3% Down Payment
  • Down Payment Assistance Available (Restrictions Apply)
  • 620 Minimum Credit Score
  • Loan Terms from 10 to 30 Years
  • Down Payment Can be Gifted
  • Monthly Mortgage Insurance
  • Not Required with 20% or Higher Down Payment
  • Automatically Cancels at 80% LTV (Loan-to-Value)
  • $726,200 Maximum Loan Amount

Conventional purchase loans are mortgages that are not backed by the government, but instead are backed by private lenders and investors. These loans meet the guidelines set by Fannie Mae and Freddie Mac, which are government-chartered companies that buy mortgages from lenders and guarantee them to investors.

One of the main advantages of conventional loans is that they offer more flexibility than government-backed loans. Conventional loans can be used to purchase primary residences, investment properties, and second homes.

Here are some key features of conventional purchase loans:

  1. Loan Requirements: Conventional loans typically have stricter qualification criteria compared to government-backed loans. Lenders usually require a higher credit score, a stable income, and a lower debt-to-income ratio to qualify for a conventional loan.
  2. Loan Limits: Conventional loans have maximum loan limits set by the Federal Housing Finance Agency (FHFA). These limits vary by location and are adjusted annually. Borrowers can typically obtain larger loan amounts with conventional loans compared to government-backed loans, which may be advantageous for purchasing higher-priced properties.
  3. Down Payment: Conventional loans usually require a higher down payment compared to government-backed loans. While down payment requirements can vary, a down payment of at least 5% to 20% of the purchase price is typical for a conventional loan. However, some lenders offer options for down payments as low as 3% for certain borrowers.
  4. Private Mortgage Insurance (PMI): If the down payment is less than 20% of the purchase price, lenders generally require the borrower to pay for private mortgage insurance (PMI). PMI protects the lender in case the borrower defaults on the loan. Once the borrower's equity in the home reaches 20% through payments or appreciation, PMI can be canceled.
  5. Interest Rates: Conventional loans often offer competitive interest rates based on market conditions and the borrower's creditworthiness. Rates can be fixed or adjustable, with fixed rates remaining the same over the loan term and adjustable rates changing periodically.
  6. Loan Terms: Conventional loans typically offer a variety of loan term options, including 15-year and 30-year fixed-rate mortgages. Shorter loan terms generally come with lower interest rates but higher monthly payments.

It's important to note that guidelines for conventional loans may vary among lenders, so it's advisable to shop around and compare offers from different financial institutions to find the best loan terms and rates that meet your needs. Consulting with a mortgage professional or loan officer can help you navigate the process and determine the most suitable loan option for your specific situation.

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