What are Conventional Loans?

Conventional loans are not guaranteed or insured by the Veteran's Administration (VA) or Federal Housing Authority (FHA). The majority of conforming conventional loans abide by the mortgage guidelines established by the government-sponsored entities known as Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

Conventional mortgages with less than 20% down require private mortgage insurance. Since Conventional Loans are not insured by the federal government there is no guarantee for the lender should the borrower default. These loans are considered higher risk for lenders and generally have more restrictive underwriting guidelines.

Conforming conventional loans:

  • Loan amounts up to $510,400 (in AZ)
  • Credit score impacts mortgage interest rate
  • No mortgage insurance required with 20% or more down payment
  • Can put down as low as 3% (private mortgage insurance required)
  • Guidelines differ slightly between Fannie Mae and Freddie Mac

Jumbo conventional loans:

  • Loan amounts greater than $510,400 (in AZ) and up
  • Credit score impacts ability to obtain mortgage.
  • Jumbo guidelines vary from Fannie Mae & Freddie Mac and are typically more strict
  • Can require more documentation
  • As low as 5% down
  • Most require a manual underwrite which is the most strict underwriting approach today

A few benefits of a Conventional Mortgage:

  • Credit does not have to be pulled on a disclaiming spouse. FHA loans require the lender to pull the disclaiming spouses credit and count obligations in the buyer's debt to income ratio.
  • Conventional loans allow for PMI to be dropped the date that the mortgage balance reaches: (1) 80% of the current property value, if the seasoning of the mortgage is greater than 5 years or (2) 75% of the current property value, if the seasoning of the mortgage is between 3 and 5 years. Value must be supported with an appraisal.
  • Allows for down payment and closing costs to be gifted by a family member.
  • Conventional mortgages offer a loan limit of $510,400
  • As low as 3% Down conventional loans

Conventional Loan Resources

Mortgage Loan Calculator
Loan Programs Video
Which Home Loan is best?
Gifting Funds Video
Can Down Payment Funds be Gifted?