What is a Conventional Loan?
A conventional loan is a mortgage that is not guaranteed or insured by any government agency. They are typically backed by private lenders and often follow the guidelines set by Fannie Mae and Freddie Mac.
Because they aren't government-backed, conventional loans usually have stricter credit requirements but offer more flexibility in terms of property types, loan amounts, and mortgage insurance.
Who is this loan best for?
- Borrowers with strong credit scores (typically 620+)
- Buyers with a down payment of at least 3% to 5%
- Those looking to buy a second home or investment property
- Homeowners looking to refinance an existing mortgage
Key Benefits
Lower Costs
Often have lower overall borrowing costs for buyers with good credit.
Property Flexibility
Can be used for primary residences, second homes, and investment properties.
Cancelable PMI
Private Mortgage Insurance (PMI) can be removed once you reach 20% equity.
Flexible Terms
Choose from 10, 15, 20, or 30-year fixed or adjustable-rate terms.
General Qualification Overview
While every situation is unique, here are the general guidelines for conventional loans.
Credit Score
Typically requires a minimum credit score of 620, though 740+ gets the best rates.
Down Payment
As low as 3% for first-time buyers, or 5% for repeat buyers. 20% avoids PMI.
DTI Ratio
Debt-to-Income ratio usually needs to be under 45% to 50% maximum.
