Conventional loan programs

What is a conventional loan

What sets conventional loans apart is their flexibility and suitability for borrowers with strong credit profiles and substantial down payments. As a high-end customer service-focused lender, we understand your unique financial position and can tailor a conventional loan to meet your specific needs.

Key benefits of conventional loans

Conventional loans offer several benefits compared to other mortgage options, and these advantages may make them an attractive choice for certain borrowers. Here are some key benefits of conventional loans:

Flexible Loan Terms


Conventional loans often provide a wide range of loan terms, allowing borrowers to choose fixed-rate or adjustable-rate mortgages. This flexibility enables borrowers to select terms that best align with their financial goals and preferences.

Higher Loan Limits


Conventional loans typically have higher loan limits compared to government-backed loans like FHA or VA loans. This makes conventional loans suitable for borrowers looking to finance higher-value properties.

No Upfront Mortgage Insurance Premium (MIP)

Unlike FHA loans, conventional loans do not require an upfront mortgage insurance premium (MIP). This can result in lower upfront costs for borrowers.

No VA Funding Fee


Conventional loans do not carry the funding fee associated with VA loans. While VA loans offer benefits for eligible veterans, conventional loans may be more cost-effective for certain borrowers.

Private Mortgage Insurance (PMI) Options


While conventional loans may require PMI for borrowers with down payments less than 20%, the advantage is that once a certain level of equity is reached, PMI can be canceled. This is in contrast to FHA loans, where the mortgage insurance premium is typically required for the life of the loan.

Versatility in Property Types


Conventional loans can be used for various property types, including primary residences, second homes, and investment properties. This versatility makes them suitable for a wide range of real estate needs.

Streamlined Refinancing Options


Conventional loans often offer streamlined refinancing options, making it easier for borrowers to take advantage of lower interest rates or adjust the terms of their mortgage.

Credit Score Flexibility


While higher credit scores are generally preferred, conventional loans may be more forgiving of credit issues compared to some government-backed loans, offering flexibility for borrowers with good credit but not necessarily excellent credit.

Seller Concessions


Conventional loans may allow for more significant seller concessions, allowing sellers to contribute more toward closing costs. This can be beneficial for buyers, especially in competitive real estate markets.

It’s important to note that the benefits of a conventional loan can vary based on individual circumstances and market conditions. Borrowers should carefully consider their financial situation and objectives when choosing a mortgage product. Consulting with a mortgage professional can provide valuable insights tailored to specific needs.

Qualifications for conventional loans

Qualifying for a conventional loan involves meeting specific criteria set by lenders and agencies that back these loans, such as Fannie Mae or Freddie Mac. While requirements may vary slightly between lenders, here are common factors that influence eligibility for conventional loans:

Credit Score

A higher credit score is generally required for conventional loans. While there is no strict minimum, a credit score of 620 or higher is often considered acceptable. However, to secure the best terms, a score above 700 is preferable.

Down Payment

The down payment requirement can vary, but conventional loans often require at least a 3% to 5% down payment. However, a larger down payment (20% or more) can result in better terms and the avoidance of private mortgage insurance (PMI).

Debt-to-Income Ratio (DTI)


Lenders evaluate your debt-to-income ratio, which compares your monthly debt payments to your gross income. Generally, a lower DTI ratio is preferred, with 43% being a common maximum for conventional loans.

Employment and Income Stability


Lenders typically look for stable employment and income history. Consistent employment and a reliable income source enhance your eligibility for a conventional loan.

Documentation of Finances


Borrowers need to provide thorough documentation of their financial situation, including tax returns, pay stubs, bank statements, and other relevant financial records.

Property Appraisal


The property being financed must undergo an appraisal to ensure its value aligns with the loan amount. This is an essential step in the approval process.

Loan Limits


Conventional loans have maximum loan limits set by Fannie Mae and Freddie Mac. Borrowers must ensure their loan amount falls within these limits.

Private Mortgage Insurance (PMI)


If the down payment is less than 20%, borrowers may be required to pay PMI. Demonstrating an ability to pay PMI, if applicable, can impact loan approval.

Working with a knowledgeable mortgage professional can help you understand the specific qualifications for the lender you choose. If you meet these criteria and have a strong financial profile, a conventional loan can be an excellent option for financing a home purchase.