Conventional Loans

One of the most common types of loans that home buyers come across is the Conventional loan. These loans are not backed by the government, like FHA and VA loans.

Conventional loans follow the guidelines that Fannie Mae and Freddie Mac – two agencies responsible for standardizing mortgage lending – have set. But it is lenders, such as banks, that are responsible for approving their Conventional loan.

A conventional mortgage is a type of home loan that is not guaranteed or insured by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA).

Conventional mortgages are typically offered by private lenders, such as banks, credit unions, and mortgage companies. They usually require a down payment of at least 5% of the home's purchase price, although a larger down payment may be required for borrowers with lower credit scores or higher debt-to-income ratios.

Conventional mortgages come in two types: conforming and non-conforming. Conforming loans conform to guidelines set by Fannie Mae and Freddie Mac, two government-sponsored entities that purchase mortgages from lenders. Non-conforming loans do not meet these guidelines and may be harder to qualify for and may have higher interest rates.

The terms and requirements of conventional mortgages can vary depending on the lender, but they generally have fixed or adjustable interest rates, and the loan term can range from 10 to 30 years.

• Designed for lower-income families
• Limited to owner-occupied, 1-unit primary residence financed through Fannie Mae or Freddie Mac
• FICO 620 (guidelines can change)
• High Balance Loan amounts up to $1,073,000 in high-cost areas for a single unit
• Eligible for primary and secondary homes
• More competitive rates and easier guidelines
• Faster turn times
• Loan amounts up to $715,000
• A conventional loan can be used to finance a property in a high-cost area
• 15-, 20-, 25- & 30-year fixed rate
• Down payments as low as 3% depending on loan amount
• Among the documents borrowers may need for a Conventional loan are:
• Fully completed loan application (1003)
• Copy of driver’s license
• Two years of full tax returns if self-employed – all pages and all schedules
• Two years of W2’s for all borrowers
• Two most recent pay stubs with year-to-date pay for all borrowers
• Two most recent asset statements – all pages with full transaction history for all accounts
• Copy of their mortgage statements on any properties owned if borrowers currently own