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Conventional Loans

What Is a Conventional Loan?

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A conventional loan is a mortgage that is not backed by a government agency. Instead, these loans are offered through private lenders and typically follow guidelines established by major mortgage investors. Conventional loans are one of the most widely used home financing options because they offer competitive interest rates, flexible terms, and multiple loan structures.

For many homebuyers, conventional financing provides a balance of affordability and flexibility — especially for borrowers with stable income, good credit, and the ability to make a down payment.

If you're still exploring your mortgage options, our guide on Understanding Different Types of Mortgages can help you compare programs and determine which one may best fit your situation.

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How Conventional Loans Work

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With a conventional loan, a private lender provides financing for your home purchase or refinance. Because the loan is not government-insured, lenders evaluate factors like your credit score, debt-to-income ratio, income stability, and down payment when determining eligibility.

Conventional loans generally fall into two categories:

Conforming Loans
Loans that meet lending guidelines and loan limits established by mortgage investors.

Non-Conforming Loans (Jumbo Loans)
Loans that exceed conventional loan limits and may have different qualification standards. If you are purchasing a higher-priced property, you may want to explore our Jumbo Loan options available through our loan programs.

For buyers who are just starting the process, reviewing The Mortgage Process: A Step-by-Step Guide can help you understand what to expect from application to closing.

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Key Benefits of Conventional Loans

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Competitive Interest Rates

Borrowers with strong credit profiles may qualify for lower interest rates, helping reduce long-term borrowing costs.

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Flexible Down Payment Options

While a 20% down payment can help eliminate mortgage insurance, some conventional loan programs allow down payments as low as 3% depending on eligibility.

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Removable Mortgage Insurance

If your down payment is below 20%, private mortgage insurance (PMI) may be required. However, unlike some government-backed loans, PMI can typically be removed once you reach about 20% home equity.

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Broad Property Eligibility

Conventional loans can be used for:

  • Primary residences

  • Second homes

  • Investment properties

  • Multi-unit homes

This flexibility makes conventional financing appealing for both homebuyers and real estate investors.

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Conventional Loan Requirements

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Requirements can vary depending on the borrower and property, but typical guidelines include:

Credit Score
Most lenders require a minimum score around 620, although higher scores can help secure better interest rates.

Down Payment
Down payments may range from 3% to 20% or more, depending on the loan structure and borrower profile.

Debt-to-Income Ratio (DTI)
Lenders review your monthly debt obligations compared to your income to ensure your mortgage payment fits comfortably within your budget.

Income and Documentation
You may be asked to provide documentation such as:

  • Pay stubs

  • W-2 forms or tax returns

  • Bank statements

  • Employment verification

If you're preparing to purchase a home soon, scheduling a Pre-Approval Meeting can help clarify your buying power and streamline the homebuying process.

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Fixed-Rate vs Adjustable-Rate Conventional Loans

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Conventional mortgages are available with different rate structures depending on your goals.

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Fixed-Rate Mortgages

  • Interest rate remains the same for the life of the loan

  • Predictable monthly payments

  • Often ideal for buyers planning long-term homeownership

 

Adjustable-Rate Mortgages (ARMs)

  • Lower introductory interest rate for an initial period

  • Rates may adjust over time based on market conditions

  • Sometimes beneficial for buyers who plan to move or refinance within several years

Homebuyers purchasing their first property often benefit from learning more about the process ahead of time. Our article Navigating Homeownership: Tips for First-Time Buyers offers helpful insights for new buyers.

 

Who Conventional Loans Are Best For

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Conventional loans are often a great fit for borrowers who:

  • Have good to excellent credit

  • Have steady income and employment

  • Can make a down payment

  • Want predictable payments and competitive rates

  • May be purchasing a second home or investment property

If you’re unsure whether a conventional loan or another option may be best, you can explore the full range of Mortgage Loan Programs available.

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Explore Your Options

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Choosing the right mortgage isn’t just about rates — it’s about finding the loan that fits your goals, timeline, and financial picture.

Whether you're buying your first home, upgrading to a new property, or exploring refinancing opportunities, having clear guidance can make the process far more manageable.

If you’d like help comparing loan options or understanding what you may qualify for, consider scheduling a mortgage consultation or pre-approval review to start your homebuying journey with confidence.

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