Conventional Loan

A Conventional Loan is a traditional home mortgage that’s not insured or guaranteed by the federal government (unlike FHA, VA, or USDA loans). Instead, it’s offered by private lenders and typically follows the lending standards set by Fannie Mae and Freddie Mac.

Because of their flexibility and competitive terms, conventional loans are one of the most popular choices for homebuyers and homeowners looking to refinance.

How a Conventional Loan Works

You borrow money from a private lender to purchase or refinance a home. The loan is repaid with fixed monthly payments covering both principal and interest over an agreed term (most commonly 15, 20, or 30 years).

Depending on your financial situation, you can choose between:

  • Fixed-rate loans – Your interest rate and monthly payments stay the same for the life of the loan.

  • Adjustable-rate loans (ARMs) – Your interest rate can fluctuate after an initial fixed period, often starting lower than a fixed-rate option.

Benefits of a Conventional Loan

Flexible Down Payment Options

You can buy a home with as little as 3% down (for qualifying borrowers), or make a larger down payment to reduce your monthly payment and avoid mortgage insurance sooner.

Competitive Interest Rates

Borrowers with strong credit profiles often receive lower rates compared to government-backed loans.

No Upfront Mortgage Insurance Premium

Unlike FHA loans, conventional loans don’t require an upfront mortgage insurance payment helping you save at closing.

Cancelable Private Mortgage Insurance (PMI)

If your down payment is under 20%, PMI is required but it can be canceled once you reach 20% equity in your home.

Broad Property Options

Conventional loans can be used for primary residences, second homes, or investment properties, offering flexibility that government loans often don’t.

Refinancing Made Simple

You can refinance your conventional mortgage to take advantage of lower rates, shorten your term, or access home equity.

Is a Conventional Loan Right for You?

A conventional loan might be the right fit if you:

  • Have good to excellent credit (typically 620 or higher)

  • Can provide a stable income and proof of assets

  • Prefer flexible loan options or plan to buy a second home or investment property