A conventional home loan is a mortgage that is not backed by a government agency like the FHA, VA, or USDA. Instead, these loans are offered by private lenders—such as banks, credit unions, and mortgage companies—and follow guidelines set by Fannie Mae and Freddie Mac.
Why Choose a Conventional Loan?
Conventional loans are the most popular type of mortgage in the United States, and for good reason. They offer flexibility, competitive rates, and options that work for a wide range of borrowers.
Competitive Interest Rates
Because conventional loans are backed by strong underwriting standards, lenders can often offer some of the most competitive interest rates available. Borrowers with good credit and solid financials typically qualify for the best rates on the market.
Flexible Down Payment Options
While many people believe you need 20% down for a conventional loan, that's not the case. Down payments can be as low as 3% for qualified borrowers. Of course, putting down more means lower monthly payments and the potential to avoid private mortgage insurance (PMI).
No Upfront Funding Fees
Unlike FHA or VA loans, conventional loans don't require upfront mortgage insurance premiums or funding fees. This can mean lower closing costs and more money in your pocket at the closing table.
PMI Can Be Removed
If you put down less than 20%, you'll pay private mortgage insurance (PMI). But here's the good news: once you reach 20% equity in your home, you can request to have PMI removed—something you can't do with FHA's mortgage insurance.
Who Is a Good Fit for Conventional Loans?
Conventional loans work well for many types of borrowers. Here's who typically benefits most:
First-Time Homebuyers
If you have solid credit and can afford a reasonable down payment, a conventional loan offers excellent terms and the opportunity to build equity quickly. Many first-time buyer programs also work alongside conventional financing.
Move-Up Buyers
Already own a home and looking to upgrade? Conventional loans are ideal for purchasing your next property with competitive rates and no government restrictions on property type.
Investors and Second Home Buyers
Conventional loans are one of the few options available for investment properties and vacation homes. If you're looking to expand your real estate portfolio, this is likely your path.
Borrowers with Strong Credit
If your credit score is 680 or higher—and especially if it's 740+—you'll likely find the best rates and terms with a conventional loan.
Loan Limits and Types
Conventional loans come in two main categories based on loan amount:
Conforming Loans
These loans fall within the limits set by the Federal Housing Finance Agency (FHFA). For 2024, the conforming loan limit is $766,550 for most areas, and up to $1,149,825 in high-cost markets like parts of California.
Jumbo Loans
Need to borrow more than the conforming limit? Jumbo loans are conventional loans that exceed these thresholds. They typically require higher credit scores, larger down payments, and more documentation—but they make it possible to finance high-value properties with a single loan.
Fixed vs. Adjustable Rate
Conventional loans offer both fixed-rate and adjustable-rate options:
Fixed-Rate Mortgages
Your interest rate stays the same for the entire life of the loan. Popular terms include 15-year and 30-year fixed. This is the best choice if you want predictable payments and plan to stay in your home long-term.
Adjustable-Rate Mortgages (ARMs)
These loans start with a lower fixed rate for an initial period—typically 3, 5, 7, or 10 years—then adjust annually based on market conditions. ARMs can save money if you plan to sell or refinance before the rate adjusts.
Requirements at a Glance
While specific requirements vary by lender, here are the typical guidelines for conventional loans:
| Requirement | Typical Guidelines |
|---|---|
| Credit Score | 620 minimum (680+ recommended) |
| Down Payment | 3% minimum (20% to avoid PMI) |
| Debt-to-Income Ratio | Generally 43-50% maximum |
| Employment | Stable 2-year history preferred |
| Property Types | Primary homes, second homes, investment properties |
The CNA Equity Advantage
At CNA Equity Group, we've helped thousands of borrowers navigate conventional financing over our 24+ years in business. We work with multiple lenders to find the best rate and terms for your specific situation.
Whether you're buying your first home, upgrading to your dream property, or expanding your investment portfolio, we provide:
- Personalized guidance tailored to your goals
- Access to multiple lenders for competitive rates
- Clear communication throughout the process
- Expert support from application to closing
Ready to Get Started?
Let us help you determine if a conventional loan is right for you. Contact us today to discuss your options and get pre-qualified.
Call us at (925) 244-1505 or click below to start your application.