Conventional loans work well for purchase or refinance transactions and are often used to finance primary homes, secondary homes, and investment properties. The terms and conditions of conventional loans are fully in line with guidelines created by the Fannie Mae and Freddie Mac agencies. Conventional loans are considered very affordable, with down payments as low as 3%, though typical requirements for down payments are usually somewhere between 5% to 25%.

Program Features

Loan amounts up to $726,200

A conventional loan can be used to finance a property in a high-cost area

15-, 20-, 25- & 30-year fixed rate

Down payments as low as 3% depending on loan amount

Temporary rate buydowns available

Frequently Asked Questions

One of the most common types of loans that home buyers come across is the Conventional loan. These loans are not backed by the government, like FHA and VA loans. Conventional loans follow the guidelines that Fannie Mae and Freddie Mac – two agencies responsible for standardizing mortgage lending – have set. But it is lenders, such as banks, that are responsible for approving their Conventional loan.

Among the documents borrowers may need for a Conventional loan are:

• Fully completed loan application (1003)
• Copy of driver’s license
• Two years of full tax returns if self-employed – all pages and all schedules
• Two years of W2’s for all borrowers
• Two most recent pay stubs with year-to-date pay for all borrowers
• Two most recent asset statements – all pages with full transaction history for all accounts
• Copy of their mortgage statements on any properties owned if borrowers currently own

Borrowers can purchase property types such as single-family homes, 1-4 Units, condominiums, and townhomes. These homes can be purchased as primary residences, second homes, or investment properties.

Private mortgage insurance (PMI) is typically required on a Conventional loan any Fannie Mae/Freddie Mac loan when there is less than a 20% down payment/equity position.

Credit score requirements for Conventional loans vary from lender to lender, but a Conventional loan may require on average a higher credit score than an FHA loan. For Bananaloans Conventional loans, borrowers will need to have at least FICO 620.

The minimum down payment amount for a Conventional loan is 3% for a fixed-rate mortgage and 10% for adjustable-rate mortgages. It is best to have as much saved up as possible for a Conventional loan down payment as a down payment of 20% or more can eliminate the need to pay monthly private mortgage insurance (‘PMI’).

Fannie Mae and Freddie Mac set Conventional loan limits and they can vary by different areas in the U.S.

Conventional loans may offer some advantages to other loan types. They require down payments as low as 3%, there may be less paperwork, and borrowers will not have monthly primary mortgage insurance (‘PMI’) with a down payment of at least 20%.

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