Conventional Loans

Freddie Mac and Fannie Mae conv-loans are a trusted choice for buyers seeking competitive terms.

1. Wide Range of Property Options

Conventional loans can be used to purchase primary residences, vacation homes, and investment properties.
Unlike FHA or USDA loans, they are not limited to specific property types or locations.

2. No Upfront Mortgage Insurance Premium (MIP)

Borrowers who put less than 20% down on a Conventional loan pay private mortgage insurance (PMI), but there is no upfront MIP like FHA loans.
Once you reach 20% equity, PMI can be canceled, lowering your monthly payments—a flexibility FHA loans don’t offer.

3. Lower Overall Costs for Qualified Borrowers

For buyers with strong credit scores and a significant down payment, Conventional loans often have lower interest rates and better terms compared to FHA loans.
These savings can reduce overall borrowing costs significantly.

4. No Government Program Restrictions

Conventional loans are not tied to government programs, giving lenders more flexibility in loan terms and conditions.
This often leads to faster processing times compared to government-backed loans.

5. No Location or Income Restrictions

Unlike USDA loans, which are limited to rural areas and have income caps, Conventional loans have no geographic or income restrictions, making them accessible to a broader range of buyers.

6. Higher Loan Limits

Conventional loans typically have higher borrowing limits than FHA loans, especially for high-cost areas. This makes them a better option for buyers looking at mid-range to luxury homes.

7. Competitive Down Payment Options

While often associated with larger down payments, Conventional loans now offer options as low as 3% down for qualified borrowers, making them accessible to first-time buyers.

8. Flexible Terms

Conventional loans offer a wide range of repayment terms, from 10 to 30 years, giving borrowers control over their monthly payments and loan structure.

9. No Funding Fees

Unlike VA and USDA loans, Conventional loans have no funding fees, reducing upfront costs for borrowers.

10. Reward for Strong Financial Standing

Conventional loans reward borrowers with good credit, stable income, and low debt-to-income (DTI) ratios with better rates and terms, encouraging financial responsibility.

Conventional loans are a versatile and cost-effective option for buyers with strong financial profiles or those purchasing homes outside the scope of government-backed programs. Their flexibility, lack of restrictions, and potential for long-term savings make them an excellent choice for many homebuyers.

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Frequently Asked Questions

What is a conventional loan?

A conventional loan is a mortgage that is not backed by a government agency like FHA, VA, or USDA loans. It is offered by private lenders and adheres to guidelines set by Fannie Mae and Freddie Mac.

What are the benefits of a conventional loan?

No upfront mortgage insurance premium.
PMI can be canceled once you reach 20% equity.
Flexible terms for primary, secondary, and investment properties.
Competitive interest rates for qualified borrowers.

What credit score do I need for a conventional loan?

Most lenders require a minimum credit score of 620, but higher scores can help you secure better interest rates and terms.

How much down payment is required for a conventional loan?

3% down for first-time homebuyers and some low-to-moderate-income borrowers.
5-20% down is common for other buyers, with 20% avoiding private mortgage insurance (PMI).

Do conventional loans require PMI?

Yes, if your down payment is less than 20%, you’ll need PMI. However, PMI can be canceled once you reach 20% equity, unlike FHA loans where mortgage insurance lasts for the loan's life.

Can I use a conventional loan to buy a second home or investment property?

Yes! Conventional loans are ideal for second homes and investment properties, offering flexible terms for these property types.

Are there income limits for conventional loans?

No, conventional loans do not have income limits, making them accessible to a wide range of borrowers.

What is the maximum loan amount for a conventional loan?

Conventional loans follow conforming loan limits set by the Federal Housing Finance Agency (FHFA). In 2024, the limit is $726,200 in most areas and higher in high-cost regions.

Can I refinance with a conventional loan?

Yes, conventional loans offer flexible refinancing options, including rate-and-term refinancing and cash-out refinancing to access equity.

How does a conventional loan compare to government-backed loans?

Conventional loans typically require a higher credit score but offer more flexibility for property types and no upfront mortgage insurance.
Government loans like FHA or VA may be better for buyers with lower credit scores or limited down payments.

What is the debt-to-income (DTI) ratio requirement for a conventional loan?

Lenders typically require a DTI ratio of 43% or lower, though some may accept higher ratios for borrowers with compensating factors.

Can I use gift funds for my down payment on a conventional loan?

Yes, conventional loans allow gift funds from family or friends to cover part or all of your down payment.

How long does it take to close a conventional loan?

Closing times vary but typically take 30-45 days, depending on the lender and market conditions.

Are conventional loans available for new construction homes?

Yes, conventional loans can be used for new construction homes, provided the property meets lender and appraisal requirements.

How can PNW Real Property help with a conventional loan?

We’ll connect you with trusted lenders, help you explore financing options, and guide you through the process to find a home that fits your goals and budget.