Conventional Loan
Looking for a smart, flexible way to finance your dream home? A conventional home loan could be the perfect fit. Backed by private lenders and designed for borrowers with solid credit and steady income, a conventional mortgage loan offers competitive rates, low monthly costs, and versatile options for first-time buyers, repeat homeowners, and even investors. Whether you're buying your forever home or refinancing, a conventional loan puts you in control, with fewer restrictions and more ways to save.
What Is a Conventional Loan?
A conventional loan is a type of mortgage that is not insured or guaranteed by a government agency, such as the FHA, VA, or USDA. These conventional mortgage loan options are offered by private lenders like banks, credit unions, and mortgage companies and typically follow the guidelines set by Fannie Mae and Freddie Mac. Conventional loans are available with fixed or adjustable interest rates and often require a higher credit score and a larger down payment—usually at least 3% to 5%—compared to government-backed loans.
One of the main advantages of a conventional house loan is that it can offer more flexibility and fewer restrictions on property types and loan amounts. Borrowers who make a down payment of 20% or more can avoid paying private mortgage insurance (PMI), which helps reduce monthly payments. Conventional loans are a popular choice for buyers with strong credit and stable income who want competitive interest rates and are looking to purchase primary residences, second homes, or investment properties through conventional home loan programs.
Conventional Home Loan Requirements
Credit Score: A minimum credit score of 620 is typically required for a conventional mortgage loan (higher scores get better rates).
Debt-to-Income (DTI) Ratio: Generally must be 43% or lower, though some lenders allow up to 50%.
Down Payment: At least 3% down for qualified buyers; 20% avoids Private Mortgage Insurance (PMI).
Stable Income & Employment: Proof of steady income and employment history is essential.
Benefits of a Conventional Loans
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Lower Costs Over Time
A conventional home loan often comes with no upfront mortgage insurance and the option to cancel PMI once you reach 20% equity.
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Flexible Loan Options
Available in various terms (15, 20, 30 years) and for different property types, including a conventional loan for investment property or a house purchase.
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Higher Loan Limits
A conventional house loan generally allows for higher borrowing amounts compared to government-backed loans.
Who Qualifies For a Conventional Loan?
✓ Buyers with strong credit scores
✓ Those with a steady income and employment history
✓ Borrowers with manageable debt levels
✓ Individuals who can make at least a 3% down payment
We'll show you exactly what's possible—without the red tape.
Conventional Loan Process
Pre-Approval
The first step in the conventional home loan process is getting pre-approved by a lender. This involves submitting financial documents, such as your credit report, income verification, and employment details. The lender will review these documents to determine how much you can borrow, giving you a pre-approval letter that helps guide your home search.
Identifying the Property
After receiving pre-approval, you can begin looking for properties within your approved price range. Conventional loans typically require that the property be a primary residence, although some lenders may allow second homes or investment properties. Your real estate agent can help you find a home that meets both your needs and the lender’s requirements.
Underwriting
Once your offer on a home is accepted, the lender sends your application to underwriting. During this stage, the underwriter carefully reviews your financial documents, including tax returns, pay stubs, bank statements, and your credit history. They also order an appraisal of the property to assess its value and condition. This step ensures you qualify for a conventional loan mortgage and ensure the property is worth the amount you’re borrowing.
Final Loan Approval
If the underwriter is satisfied with the application and appraisal, your loan moves to final approval. The lender will issue a commitment letter outlining the terms of your conventional house loan. If necessary, they may request additional information or documentation. Once all conditions are met, you’ll receive final loan approval.
Closing
The final step in the conventional loan process is closing. During this stage, you’ll sign the loan documents and any other required paperwork. You’ll also pay any closing costs and the down payment, if applicable. Once everything is signed and the funds are disbursed, you’ll receive the keys to your new home.
Who Can Finance with a Conventional Home Loan
First-time homebuyers who want competitive rates through a conventional mortgage loan.
Homeowners refinancing their existing mortgage
Repeat buyers looking for a conventional loan for house purchases with flexible terms.
Buyers of primary, vacation, or investment properties
Frequently Asked Questions for Conventional Loan
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Yes, but you’ll need to pay PMI until you reach 20% equity.
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It depends on your financial profile—conventional loans are better for those with higher credit scores.
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Yes, with proper income documentation and tax returns.
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Typically 30 to 45 days from application to closing.
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Generally, conventional loans are not assumable, meaning a new buyer cannot take over your loan terms. Assumable loans are more common with FHA, VA, and USDA loans.
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A conventional home loan is a mortgage not backed by a government agency. It’s offered by private lenders and typically follows Fannie Mae or Freddie Mac guidelines.
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FHA loans are government-backed and easier to qualify for with lower credit and down payment requirements. Conventional loans require stronger credit but can cost less over time and don’t require mortgage insurance once you reach 20% equity.
Success Stories
Secure Your Dream Home with a Conventional Loan Today
Apply for conventional loan and take the first step toward competitive rates, flexible terms, and the perfect property. Get pre-approved for an FHA 203k loan and discover your renovation budget today.