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Conventional Loans

 What is a conventional loan?

Conventional loans are loans which are ultimately sold to either Fannie Mae or Freddie Mac which are government owned agencies.  Both Fannie Mae and Freddie Mac set the guidelines for these loans which lenders must follow in order to have the ability to sell off the loan.


Conventional loans do not require a funding fee or anything of the sort like most other loan programs do.  They also are usually the most competitive when it comes to rates and closing costs as well.

Who are conventional loans  for?

Borrowers which are putting 10% or more down are usually better served with a conventional loan.  They are also geared for borrowers with higher credit score, the higher the better.  Typically borrowers need a 640 or better when obtaining a conventional loan.  Conventional loans are also the loan of choice of refinance when there is more than 10% equity in house and borrower has above average credit.

What to know

Although conventional loans do not have funding fee they do require private mortgage insurance when your loan to value (LTV) is over 80% of the value/purchase price of the home.  Private mortgage insurance or PMI is usually paid monthly however there is options to pay up front or even roll into the loan.  PMI is issued by a third party which means that they will have to approve your loan as well if you are above 80% LTV.

640 is typically minimum credit score but usually comes with higher rate that can make other loan programs more attractive.  Average credit score for conventional loans is typically from 680 to 700.

Please do not hesitate to contact us if you have any further questions regarding this program or are interested in applying for an FHA loan.