Conventional Loans

Conventional mortgages guidelines are set by Fannie Mae and Freddie Mac and conform to the loan limits set by the Federal Housing Finance Administration, or FHFA. The conforming loan limits are $647,200 however in some cases depending on if you are in a high-cost area it can go as high as $970,800. Once you go over those amounts you are going to be in the Jumbo Loan category. Conventional loans are not backed by a government agency, such as VA or HUD. Because Conventional loans are not guaranteed by the government, they tend to have tougher requirements.

What are the Advantages of conventional loans?

Qualifying for a conventional loan might be harder than qualifying for a government backed loan like FHA, but there are many options available that you cannot get with a government backed loan.

  • More property types: Jumbo loans for pricier homes, second homes, and investment properties.
  • No program-specific fees: Conventional loans don't have the additional program-specific costs of government-backed loans. For example, with a FHA
  • loan you'll pay a 1.75% upfront mortgage insurance premium; VA loans have a funding fee of 1.4 to 2.3%, depending on your down payment and have you used it before.
  • More choices in loan terms: The 30-year fixed-rate conventional mortgage is the most popular, you can find other terms (like 15- or 20-year loans) as well as adjustable-rate mortgages. Since lenders don't have to follow government-prescribed programs, they can create more options.
  • Control over mortgage insurance: If your down payment on a conventional loan is less than 20%, you'll have to pay private mortgage insurance. After your principal loan balance drops to 78% of the home’s value, you can ask to cancel your Mortgage Insurance. Mortgage insurance is required on all FHA loans even if the amount you owe is less than 80% of your home’s value and it can last for the life of the loan.