Understanding Conventional Loans: What You Need to Know

When it comes to home financing, conventional loans remain one of the most popular and flexible mortgage options available. Whether you’re buying your first home, upgrading, or refinancing, understanding how conventional loans work can help you make confident, informed decisions.

✅ What Is a Conventional Loan?

A conventional loan is a mortgage that’s not backed by a government agency like the FHA, VA, or USDA. Instead, it’s offered through private lenders such as banks, credit unions, or mortgage companies and often conforms to guidelines set by Fannie Mae and Freddie Mac.

💡 Key Features of a Conventional Loan:

• Down Payment Options: As low as 5% for first-time buyers, though 20% is standard to avoid private mortgage insurance (PMI).

• PMI (Private Mortgage Insurance): Required if your down payment is less than 20%, but can be removed once you reach 20% equity.

• Flexible Terms: Typically offered in fixed or adjustable rates, with 15-, 20-, or 30-year term options.

• Credit Score Requirements: Usually requires a minimum credit score of 620 or higher, though better rates come with higher scores.

• Loan Limits: Must fall within conforming loan limits (set annually by the FHFA); anything above is considered a jumbo loan.

🏠 Who Is a Conventional Loan Best For?

• Buyers with good credit and stable income

• Those who can afford a larger down payment

• Homeowners looking to refinance from a government-backed loan

• People who want to avoid upfront mortgage insurance fees

📊 Pros and Cons of Conventional Loans

Pros:

• Competitive interest rates for qualified borrowers

• No upfront mortgage insurance (unlike FHA loans)

• PMI can be removed once equity reaches 20%

• More property types allowed (second homes, investment properties)

Cons:

• Higher credit score requirements

• Larger down payment typically needed

• Stricter income and debt-to-income (DTI) criteria

🔁 Can You Refinance a Conventional Loan?

Absolutely. Conventional loans offer excellent refinancing flexibility, whether you’re lowering your rate, changing terms, or switching from an FHA loan to remove mortgage insurance.

💬 Thinking About a Conventional Loan?

Whether you’re a first-time buyer or an experienced homeowner, we’re here to help you find the right mortgage fit. We’ll walk you through every step, break down the numbers, and show you how much you could save.

👉 Get in touch today or use our instant calculator to explore your payment options.