The most popular loan in the industry
Maximize your home purchase budget and enjoy lower monthly payments with a fixed, competitive interest rate. Historically, the 30-year fixed loan is the mortgage industry's most popular type of loan. It's known for its repayment term of 30 years, with affordable payments spread out equally over that timeframe. Best of all, your interest rate is locked when the loan is finalized.
A conventional mortgage is a home loan that’s not insured by the federal government. There are two types of conventional loans: conforming and non-conforming loans.
A conforming loan simply means the loan amount falls within maximum limits set by the Federal Housing Finance Agency. The types of mortgage loans that don’t meet these guidelines are considered non-conforming loans. Jumbo loans, which represent large mortgages above the FHFA limits for different counties, are the most common type of non-conforming loan.
Generally, lenders require you to pay private mortgage insurance on many conventional loans when you put down less than 20 percent of the home’s purchase price.
Pros of conventional mortgages
Can be used for a primary home, second home or investment property
Overall borrowing costs tend to be lower than other types of mortgages, even if interest rates are slightly higher
You can ask your lender to cancel PMI once you’ve reached 20 percent equity
You can pay as little as 3 percent down on loans backed by Fannie Mae or Freddie Mac
Cons of conventional mortgages
Minimum FICO score of 620 or higher is often required
You must have a debt-to-income ratio of 45 percent to 50 percent
You’ll likely need to pay PMI if your down payment is less than 20 percent of the sales price
Significant documentation required to verify income, assets, down payment and employment
Who should get one?
Conventional loans are ideal for borrowers with strong credit, a stable income and employment history, and a down payment of at least 3 percent.