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Conventional Mortgages Benefits & Guidelines


How Do I Know if I Am Eligible for a Conventional Loan Program?

Every lender has slightly different terms and eligibility standards for their conventional loan programs. Ideally, you should meet with several lenders to find the best fit for you. Doing so may help you get the right loan for your needs and situation, plus you may get a lower interest rate and lower closing costs. This may save you thousands of dollars over the short- and long-term.

Conventional loans offer:

  • Low Down Payment: With a conforming conventional loan, borrowers can put as little as 3% down, making conventional financing a strong competitor to FHA, which requires you to put 3.5% down. It’s worth noting that VA Loans offer zero money down options for those who qualify.

  • Down Payment Assistance: Borrowers can use a monetary gift from a relative or eligible grant from a non-profit agency to pay for your entire down payment and loan closing costs.

  • Cancellable Private Mortgage Insurance (PMI): Lenders require you to pay for PMI if your down payment is less than 20% of the purchase price. But for borrowers with good credit, PMI on conventional loans might cost less than FHA mortgage insurance. This is because PMI is risk-based insurance, meaning that the better your credit history, the lower your premium. Plus, over time when you pay down the principal balance of your mortgage, combined with increases in your home’s value, you may be able to get the PMI canceled — if your mortgage reaches ≤ 80% of the home value.

  • High Loan Limits: Loan limits for conventional mortgages are set by the Federal Housing Finance Agency (FHFA). For 2022, the conventional loan limit set for one-unit properties in many US counties is $647,200. However, there are designated high-cost areas where loan limits are higher. For example, a single-family home in Los Angeles County could have a maximum loan of $970,800. Increased loan amounts are also available for 2-, 3-, and 4-unit homes. For multi-unit homes located in high-cost areas, loan limits are even higher.

What Are the Advantages of Conventional Loans?

If your credit score is over 680, and you have a debt-to-income (DTI) ratio of 43% or less, conforming conventional loans can offer great rates, lower costs, and can be used to buy all kinds of property types, including single-family (detached) homes to second homes, investment properties and multi-unit properties. Conforming conventional loans are loans that adhere to the standards set by Fannie Mae and Freddie Mac, including maximum loan amounts.

Today's Mortgage Rates

Disclaimer: these are sample rates and terms based on daily pricing that fluctuates and is subject to change and credit approval. Parameters: 720+ FICO, Single-Family Residence, $300,000 loan amount, State = NC, County = Wake, Discount Points range from 0.0% to 2.0% as shown above, Admin Fee = $1149. For VA Home Loan, assume a 2.3% VA Funding Fee.