What is a Conventional Loan?

A conventional loan is a mortgage that is not guaranteed or insured by the federal government.

Most conventional mortgages are known as “conforming loans” which simply means that they meet the requirements to be sold to Fannie Mae or Freddie Mac.

Because there are several different sets of guidelines that fall under the umbrella of “conventional loans,” there’s no single set of requirements for borrowers.

Why Choose a Conventional Loan?


Conventional loans generally have lower closing costs than government loans as they do not have upfront funding fees.

Loan terms and rate types provide a little more flexibility and options.  Monthly mortgage insurance premiums can be “bought-out” (LPMI) or will naturally fall off at some point during the life of the loan.

Conventional Loans Also offer First Time Home Buyer options

Home Ready / Home Possible

The HomeReady (Fannie Mae) and the Home Possible (Freddie Mac) loans are great options for a first time home buyer.

Both programs offer a 3% down payment and reduced mortgage insurance premiums.

Annual income limits apply and are based on the census tract of the property.

Conforming Loan Limits for 2021 is $548,250 for most Counties.

Eligible Properties

Conventional loans are available for Primary Residence, Second Homes, and Investments for these property types

  • Single Family – Attached and Detached

  • Townhomes

  • Condominiums

  • Modular and Manufactured

Maximum Loan Amounts for Conventional Loans

Purchase – 5% down Payment Requirement

First Time Home Buyer Programs – 3% down Payment Requirement

Purchase without PMI – 20% Down Payment

Refinance/ No Cashout – 95% Max Loan to Value (95% of the appraised Value)

Cashout Refinance – 80% of the appraised Value.

Contact me to see how I can help with your mortgage needs.