Conventional Loans are the most common mortgage type you’ll come across and often the usual starting point for many when shopping for a mortgage loan because they’re exactly what they sound like: conventional. The process to obtain one requires a minimum down payment of 5%, for a maximum loan amount of $726,200. Also, seller concession is up to 3-9% of the sales price, while the Private Mortgage Insurance (PMI) required is over 80% Loan-to-Value (LTV), or the amount of the mortgage compared with the value of the property. While all of that may sound convoluted, it is fairly, well, conventional.
Conventional Loans
What is a Conventional Loan?
Who is eligible?
A Conventional Loan will appeal to borrowers with a strong credit rating (at least 620 to qualify, with a score above 740 to help you get the best rate) and can put a down payment of 3% or more. They’re not backed by a government agency, and the loan limits are set by the FHFA (Federal Housing Finance Administration). The down payment and income requirements for a conventional loan are often set by Freddie Mac and Fannie Mae.
Features
Fewer fees:
Unlike other loans, such as FHA Loans, Conventional Loans don’t have program-specific fees.
More lending options:
Conventional Loans have flexibility. You can start with a 30-year fixed, or maybe 15-year. How about 20-year? Or adjustable rate?
More property types:
You have more options for homes you’re looking at, such as a second home or property you’re looking at as an investment.
Who is eligible?
A Conventional Loan will appeal to borrowers with a strong credit rating (at least 620 to qualify, with a score above 740 to help you get the best rate) and can put a down payment of 3% or more. They’re not backed by a government agency, and the loan limits are set by the FHFA (Federal Housing Finance Administration). The down payment and income requirements for a conventional loan are often set by Freddie Mac and Fannie Mae.
What other loan types are available?
When it comes to loans, you have many more options than you think. Find out about some here:
