What is a conventional loan?

A conventional loan is a mortgage that is not backed by the government (such as FHA, VA, or USDA loans). Instead, these loans follow guidelines set by Fannie Mae and Freddie Mac and are funded by private lenders.

How does a conventional loan differ from government-backed loans?

The main differences include:
✔ Not insured by the government (FHA, VA, or USDA loans are)
✔ Higher credit score requirements
✔ PMI required if down payment is less than 20%
✔ More flexible property options (some government loans have strict property requirements)
✔ No upfront funding fees like FHA and VA loans

Conventional loans work well for borrowers with strong credit and stable income who want flexible loan terms and lower costs over time.

Conventional Loan Requirements

What are the credit score requirements?

Most lenders require a minimum credit score of 620 for a conventional loan, but a higher score (700+) can help you qualify for better rates.

How much down payment is required for a conventional loan?

✔ 3% minimum for first-time buyers
✔ 5% minimum for repeat buyers
✔ 20% down avoids PMI (but is not required)

What is private mortgage insurance (PMI), and when is it required?

PMI is an extra cost required if you put down less than 20%. It protects the lender in case of default. PMI can be removed once you reach 20% equity in your home.

Conventional Loan Process

What documents are needed for a conventional mortgage?

To apply, you’ll typically need:
✔ Income verification (pay stubs, W-2s, tax returns)
✔ Credit history & score check
✔ Bank statements & asset verification
✔ Employment history & proof of stable income
✔ Debt-to-income ratio assessment

How long does it take to close?

The average closing time for a conventional loan is 30-45 days, depending on appraisal, underwriting, and lender efficiency. Well-prepared borrowers can close faster.

Loan Limits & Interest Rates

What are the current conventional loan limits?

For 2025, the conventional loan limit is $806,500 in most areas and up to $1,209,750 in high-cost areas. Loan limits adjust annually based on housing market trends.

How are interest rates determined?

Conventional mortgage rates depend on:
✔ Market conditions (Federal Reserve policy, bond yields)
✔ Your credit score (Higher scores = better rates)
✔ Down payment amount (More down = lower rate)
✔ Loan term (Shorter terms like 15 years usually have lower rates)
✔ Debt-to-income ratio

Your rate is personalized based on your financial profile.

Conventional Loan Programs

What is the difference between conforming and non-conforming loans?

• Conforming loans meet Fannie Mae & Freddie Mac guidelines and stay within loan limits.
• Non-conforming loans (Jumbo loans) exceed loan limits and have stricter credit & income requirements.

Are there special conventional loan programs for first-time buyers?

Yes! Some options include:
✔ 3% Down Conventional Loans (Fannie Mae HomeReady & Freddie Mac Home Possible)
✔ Down Payment Assistance (DPA) Programs
✔ Lender or state-specific first-time homebuyer grants

These programs help first-time buyers qualify with lower down payments & flexible credit requirements.