🏠 What is a Conventional Loan?

A Conventional Loan is a type of mortgage that’s not backed by a government agency like FHA, VA, or USDA. These loans follow guidelines set by Fannie Mae and Freddie Mac, and are the most common type of mortgage in the U.S.

📌 Key Features

• Available for primary residences, second homes, and investment properties
• Minimum down payment as low as 3% (for qualified buyers)
• Private Mortgage Insurance (PMI) required if putting less than 20% down
• Fixed-rate and adjustable-rate options available
• Typically requires a higher credit score (620+)

✅ Pros of Conventional Loans

• No upfront mortgage insurance premium
• PMI can be removed once you reach 20% equity
• More flexible loan terms (10, 15, 20, or 30 years)
• Often lower overall cost compared to government-backed loans

⚠️ Cons of Conventional Loans

• Stricter credit and income requirements
• PMI adds to monthly costs if putting less than 20% down
• Not ideal for buyers with limited credit or higher debt-to-income ratios

💼 Conforming vs Non-Conforming

Conventional loans come in two categories:

• Conforming – Meets Fannie Mae/Freddie Mac loan limits (e.g., $766,550 for 2024 in most areas)
• Non-Conforming – Also called Jumbo Loans; exceeds loan limits or has unique features

📝 Typical Requirements

• Credit score of 620 or higher (higher for better rates)
• Down payment of at least 3%–5%
• Debt-to-Income Ratio typically below 43%
• Stable income and employment history