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Take advantage of competitive interest rates with a conventional home loan.

Utilize a conventional home loan and enjoy the flexibility of lender-based conditions.

A conventional loan is a type of mortgage that is not insured or guaranteed by a government agency such as the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), or the Department of Agriculture (USDA). Instead, these loans are typically backed by private lenders, and their terms and conditions are set by the lender. Here are the key details and features of a conventional loan:

Key Features:

  1. Loan Types:
    • Conforming Loans: These loans meet the guidelines set by Fannie Mae and Freddie Mac, including loan limits, borrower creditworthiness, and down payment requirements.
    • Non-Conforming Loans: These include jumbo loans, which exceed the conforming loan limits set by Fannie Mae and Freddie Mac, and other loans that do not meet these guidelines.
  2. Interest Rates:
    • Conventional loans often offer competitive interest rates that can be fixed or adjustable. Fixed-rate loans maintain the same interest rate for the life of the loan, while adjustable-rate mortgages (ARMs) have interest rates that can change periodically.
  3. Down Payment:
    • Conventional loans typically require a higher down payment than government-backed loans. A common requirement is at least 5% to 20% of the home’s purchase price, though some programs allow for as low as 3% down for qualified buyers.
  4. Private Mortgage Insurance (PMI):
    • If the down payment is less than 20%, borrowers are usually required to purchase private mortgage insurance (PMI) to protect the lender in case of default. PMI can be removed once the borrower reaches 20% equity in the home.
  5. Loan Limits:
    • The loan limits for conventional loans are set annually by the Federal Housing Finance Agency (FHFA). For 2024, the baseline conforming loan limit for a single-family home is $753,750 in most areas, with higher limits in high-cost areas.
  6. Credit Score Requirements:
    • Conventional loans generally require a higher credit score compared to FHA loans. A minimum credit score of 620 is often required, but a higher score can result in better interest rates and loan terms.
  7. Debt-to-Income Ratio (DTI):
    • Lenders typically prefer a debt-to-income ratio of 49% or lower, although some lenders may accept higher ratios depending on the borrower’s overall financial situation.

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