Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, USDA Loans), but they must meet the lending guidelines set by Fannie Mae or Freddie Mac.
This loan type gives borrowers more flexibility regarding loan terms, down payment, property type, and occupancy. They are available for loan amounts up to the conforming loan limit. Higher loan amounts are available in high-cost areas like San Diego, Orange, and Los Angeles Counties.
Conventional loans are optimal for borrowers with good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 5-20%, and reliable monthly income.
With good credit, conventional offer competitive interest rates. Conventional loans do not require upfront or monthly mortgage insurance with a down payment of 20% or greater. These loans are available for financing a primary residence, second home, and investment properties.
Fixed Rate Mortgages: Your rate and payment never change.
Adjustable Rate Mortgages: After the initial period your interest rate can change once a year.
First-Time Homebuyers can qualify for Conventional Loans with as little as a 3% down payment for single-unit, primary residence Purchase transactions. Subsequent homebuyers are required to put down at least 5% of the home's purchase price. For a Rate and Term Refinance transaction on a single-unit primary residence, guidelines require at least 5% equity in the property. For a Cash-Out Refinance, the maximum loan amount is 80% of the property value.
Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4 family residences. A conventional loan can also be used to finance a primary residence, second home and investment property.