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What is a conventional loan

A conventional loan is a type of mortgage that is not insured by a government agency like the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, private lenders like banks, credit unions, and mortgage companies offer and guarantee conventional loans. Guidelines for these loans are set by institutions like Fannie Mae and Freddie Mac, which are government-sponsored entities that buy and package mortgages from lenders. These guidelines determine eligibility requirements for borrowers, including credit score, down payment, income, and debt-to-income ratios.

Key features of
conventional loans include:

Higher Credit
Standards

A strong credit history is more likely to lead to favorable terms and lower interest rates when it comes to conventional loans. This is because conventional loans typically require higher credit scores than government-backed loans.

Down Payment

There is generally a higher down payment with conventional loans than with FHA or VA loans. While exact percentages may vary, most borrowers put up 5% to 20% of the cost of the home.

Private Mortgage
Insurance (PMI)

Private mortgage insurance is often required if a borrower places less than 20% down on a conventional loan. PMI protects lenders in case the borrower defaults. When a borrower reaches 20% equity in a home, they are typically able to cancel PMI coverage.

Loan Limits

You can also borrow a maximum amount with a conventional loan, which is determined by the loan type (conforming or non-conforming) and location of the property.

Flexibility

Conventional loans can be used for a variety of property types, including primary residences, second homes, and investment properties.

interest Rates

Interest rates on conventional loans may be competitive, but your exact rate will depend on your credit score, down payment, and current market conditions.

It's important to note that there are Two main categories of conventional loans:

Conforming Loans

These loans meet the guidelines set by Fannie Mae and Freddie Mac. They adhere to the maximum loan limits set for each year. Conforming loans generally have more favorable terms and interest rates because they can be sold to these government-sponsored entities.

Non-Conforming Loans

Also known as jumbo loans, these loans exceed the maximum loan limits set by Fannie Mae and Freddie Mac. Because they are not eligible to be sold to these entities, they often have stricter credit requirements and higher interest rates. Learn more > about jumbo loans

FAQ

You can start the application process on our website by filling out the form online, setting up a loan consultation appointment, or calling us on the phone. There is not an application fee.
Your borrowing capacity depends on your income, expenses, creditworthiness, and the type of loan you’re applying for. We’ll work with you to find a loan amount that works with your budget and your comfort level.
We will typically work through this together. You will want to lock in once you are under contract on your home and your loan has been uploaded to the lender.
Yes, you can make extra payments and even pay off your mortgage early. If you are paying off your mortgage you can do so after making six monthly payments without a penalty.
Yes, you can make extra payments and even pay off your mortgage early. If you are paying off your mortgage you can do so after making six monthly payments without a penalty.
Closing costs include fees for services such as title company costs, setting up your escrow account (property taxes and insurance), origination fees from lender for underwriting, etc. We typically have the lender pay our origination fee to help keep your closing costs lower.
We offer a range of home loan options, including Conventional, FHA, VA, USDA, Jumbo, Bank Statement, Asset Qualifier, Refinance, Reverse Mortgage, and so many others. Each loan type has unique features to suit different financial situations. Let our expertise guide you to find the one that is right for you.
Loan Approval: You receive final approval from the lender (clear to close). Closing: The final paperwork is signed by all parties and the loan is then funded and recorded.
As mortgage brokers we have access to 60+ wholesale lenders providing you with multiple options for all your home buying needs with lower rates and exceptional service. At Loans By Vicky, we stay in constant contact with you throughout the entire process. We are still here for you even after you close. We love making friends one mortgage at a time!
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