Conventional Loans
The most widely used loan type, with flexible terms for established credit.
Conventional loans are not backed by a government agency. Most follow Fannie Mae or Freddie Mac guidelines, which makes them predictable, competitively priced, and usable for far more property types than government programs.
If you have solid credit, conventional financing is often the lowest total cost option, especially because mortgage insurance can come off once you reach enough equity.
Fixed vs. adjustable
A fixed-rate conventional loan keeps the same principal and interest payment for the full term, usually 30, 20, or 15 years. An adjustable-rate mortgage starts with a lower fixed period and then adjusts on a set schedule.
Shorter terms carry higher payments but far less total interest. We will model the real numbers side by side before you decide.
How PMI actually works
Private mortgage insurance applies when you put down less than 20 percent. It can be paid monthly, financed into the rate, or paid in a single premium. Once your loan balance reaches roughly 80 percent of value, you can generally request removal, and it terminates automatically at 78 percent under servicer rules.
What underwriting reviews
Conventional pricing and approval hinge on four levers: credit score, loan-to-value, debt-to-income, and reserves. Improving any one of them can change your rate, so we model scenarios before locking.
- Debt-to-income generally up to 45 to 50 percent with strong compensating factors
- Two years of income history, with flexibility for job changes in the same field
- Reserves of two to six months are common on second homes and rentals
Documents to gather
A complete file up front is what keeps a conventional loan on schedule.
- 30 days of pay stubs, two years of W-2s, or two years of returns if self-employed
- Two months of asset statements, all pages
- Mortgage, tax, and insurance details for any property you already own
Advantages
- PMI is removable, unlike FHA mortgage insurance
- Works for primary homes, second homes, and rentals
- Wide range of terms and structures
- Often the best pricing for strong credit profiles
Things to consider
- Tighter credit and debt-to-income standards than FHA
- Pricing is credit-score sensitive
- Reserves may be required for non-primary properties
Common questions
Is 20% down required?
No. Qualified buyers can put down as little as 3 percent. Twenty percent simply avoids mortgage insurance.
Can I use a conventional loan for a rental property?
Yes. Investment property financing has higher down payment and reserve requirements, but it is available.
When does PMI come off?
You can typically request removal at 80 percent loan-to-value based on the original value, and it terminates automatically at 78 percent. A new appraisal may allow earlier removal if your home has appreciated.
Conventional or FHA, which is cheaper?
It depends on your credit score and down payment. Above roughly 680 with 5 percent down, conventional usually wins on total cost. We run both side by side so you can see the real numbers.
Program disclaimers
- * Higher interest rates apply
- ** For a 30-year, fixed-rate loan
- Program details are informational only and are not an offer for extension of credit or a commitment to lend. Terms are subject to change without notice.
Ready to explore Conventional financing?
Start a conversation with a licensed loan officer, or begin your application whenever you're ready.