What Is a Conventional Loan?

A conventional loan is a mortgage that is not insured or guaranteed by a government agency, unlike FHA, VA, or USDA loans. Most are “conforming,” meaning they meet the guidelines and loan limits set by Fannie Mae and Freddie Mac. Because they are so widely accepted, conventional loans are often a straightforward path for borrowers with stable credit and income.

Benefits of Conventional Loans

• Competitive interest rates. Borrowers with strong credit and steady income can often secure attractive pricing.
• Flexible loan terms. Choose from options such as 15-, 20-, and 30-year terms to balance payment size against total interest.
• Multiple down payment options. Some programs allow as little as 3% down for eligible buyers, while a larger down payment can lower your monthly cost.
• Removable mortgage insurance. Private mortgage insurance (PMI) can typically be removed once you build enough equity.
• Property type flexibility. Finance a primary residence, second home, or investment property.
• Fixed or adjustable rates. Pick a fixed rate for stability or an adjustable-rate mortgage (ARM) if it suits your plans.

Conventional Loan Requirements

Guidelines vary by lender and program, but borrowers are generally reviewed on:

• Credit score. A minimum score of around 620 is common, and higher scores often lead to better pricing.
• Down payment. Options range from as little as 3% to 20% or more. A 20% down payment generally avoids PMI.
• Debt-to-income ratio. Lenders compare your monthly debts with your income to confirm the payment is manageable.
• Income and employment. Stable, documented income and work history strengthen your application.
• Cash reserves. Second homes and investment properties may require additional savings after closing.

Understanding PMI on a Conventional Loan

If your down payment is under 20%, your lender will typically require PMI. It protects the lender and makes lower down payments possible. The cost depends on your credit score, loan amount, and down payment. A key advantage is that PMI can usually be requested for removal once your balance reaches 80% of the home’s original value, and it generally ends automatically at 78%. Mike shows you the estimated cost up front so you can budget with confidence.

Fixed-Rate vs. Adjustable-Rate Mortgages

Fixed-rate loans keep your interest rate and principal and interest payment the same for the life of the loan. They are a strong fit if you plan to stay in your home long term and want predictable payments.

Adjustable-rate loans start with a lower introductory rate that can change after a set period. They may make sense if you expect to sell or refinance before the adjustment begins. Mike explains how each option works so you can choose with clarity.

Conforming vs. Jumbo Loans

Conforming loans must stay within limits set each year by the Federal Housing Finance Agency, and those limits vary by county. If your purchase price exceeds the limit, a jumbo loan may be the better fit. Mortgage Mike Group offers both and can help you decide which path matches your price range.

Conventional Loans for Every Type of Borrower

First-time homebuyers. Low down payment programs may help you get started without the 20% many people expect.

Move-up buyers. Flexible terms can support your next purchase as your needs change.

Second-home buyers. Finance a vacation or secondary property with a conventional loan.

Real estate investors. Conventional loans can finance rental properties, though down payment and reserve requirements differ.

Homeowners looking to refinance. Lower your rate, change your term, or access equity with a conventional refinance.

The Conventional Loan Process: What to Expect

1. Consultation. Share your goals, budget, and timeline with Mike.
2. Pre-approval. Review your credit, income, and assets so you can shop with a clear price range.
3. Home search. Work with your real estate agent to find the right property.
4. Appraisal and underwriting. The property is appraised and your file is reviewed.
5. Closing. Mike keeps you informed at every step until you get your keys.

Why Choose Mortgage Mike Group?

• Personalized guidance built around your finances and goals
• Clear communication about costs, requirements, and timelines
• A range of loan programs, including FHA, VA, USDA, jumbo, bank statement, DSCR, and more
• Support from consultation to closing

Choosing the right home financing starts with working with a trusted lender like Mortgage Mike Group, who can match you with the loan that fits your goals. First-time buyers often explore FHA loans, conventional loans, and down payment assistance programs to make ownership more affordable, while eligible veterans and rural buyers can benefit from VA loans and USDA loans. Buyers of higher-priced homes may consider jumbo loans, and self-employed borrowers can qualify through bank statement loans or profit and loss programs. Real estate investors have options like DSCR loans and hard money loans, and homeowners aged 62 and older can look into a reverse mortgage loan to access their home equity.