Conventional Loan

A conventional loan is a mortgage that is not guaranteed or insured by any government agency.

It is most often a fixed rate and term, but adjustable rate mortgages are available. While primary residences are the most common type of purchase with a conventional loan, second homes, investment properties and land loans are also available as conventional.



Your credit score is a major part of the equation when qualifying for a conventional mortgage. Fannie Mae and Freddie Mac require that the borrower have a credit score of at least 620 to qualify. It is important to note that the lower your credit score is, the higher the interest rate will be.

Conventional loans have DTI (Debt to Income) requirements on the loan. Most conventional loans are capped at 45% of your gross qualifying income compared to your debt load and new mortgage payment.

Any conventional mortgage loan with less than a 20% down payment requires private mortgage insurance (PMI). Smaller down payments require a higher PMI premium. For example, 5% down requires a higher premium than 10% down. When you hit the equity mark of 20% on your home the PMI will fall off.

An escrow account for your home owner’s insurance and property taxes each month is required if you do not put 20% or more down on the property