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Conventional Loans Explained

Buying a home is one of the biggest financial decisions you’ll make, and choosing the right mortgage type matters. Conventional loans are one of the most common mortgage options, especially for buyers with strong credit and solid financial standing. In this section, we explain how conventional loans work, who they tend to benefit, and how they compare to other loan types.

Who Conventional Loans Are Often Best For

Most buyers who pursue conventional financing are:

  • Planning to buy a primary residence or a second home

  • Comfortable with private mortgage insurance (PMI) when applicable

  • Able to make a larger down payment to avoid PMI

  • Looking for flexible terms and competitive pricing

  • Able to support stronger credit and stable income history

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Conventional loans are especially common for buyers who want predictable payments and don’t have specific government program eligibility requirements (like VA or FHA).

How Conventional Loans Work

Conventional loans are mortgages that are not guaranteed by a government agency. Instead, they are backed by private lenders and follow standards set by entities like Fannie Mae and Freddie Mac.

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Key points:

  • Down payment: Often 3%–20%+ depending on the program

  • PMI (Private Mortgage Insurance): Required if down payment <20%

  • Credit score: Strong credit profiles often result in better rates

  • Loan terms: Commonly 15-year or 30-year fixed, and adjustable-rate options

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Your specific rates and terms will depend on credit, income, assets, and market conditions at the time of application.

Conventional vs. Other Loan Types

Conventional vs. FHA

  • FHA loans allow lower down payments and more flexible credit

  • Conventional loans usually have lower overall insurance costs when PMI drops off

  • Conventional PMI can be removed once equity reaches 20%

 

Conventional vs. VA

  • VA loans are available only to eligible veterans and come with unique benefits

  • Conventional loans are available to all qualifying buyers and do not require VA eligibility

 

Conventional vs. Jumbo

  • Jumbo loans apply when the loan amount exceeds conforming limits

  • Conventional loans are ideal when the purchase price falls within conforming limits

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Common Questions About Conventional Loans

Do I need 20% down?
No. Many conventional programs allow down payments as low as 5% or even 3% for eligible first-time homebuyers. Putting down less than 20% usually requires PMI.

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What is PMI and how long does it last?
Private Mortgage Insurance protects the lender when your down payment is low. Once you reach 20% equity, in most cases PMI can be removed.

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How does my credit score affect my rate?
Higher credit scores often result in more competitive pricing. We can help you understand where you stand and options available at different score tiers.

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Read more on our FAQ page.

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Your Next Step

Choosing the right loan is more than definitions — it’s about how each product fits your situation and goals.

If you’re exploring financing options for your home purchase, we’d be happy to talk through your questions and help you understand how a conventional loan compares to FHA, VA, and other financing paths.

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