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Conventional loans: the classic mortgage solution

When it comes to securing a mortgage, you’ll likely encounter various loan options, each with its unique characteristics and advantages. The most common loan, and what many consider the “king” of mortgages, is the conventional loan. Here, we will explore what conventional loans are, their features, and why they might be the right choice for you.

Understanding conventional loans

A conventional loan differs from government-backed mortgage options like FHA or VA loans. Instead, it adheres to the guidelines set by two major agencies in the mortgage industry: Fannie Mae and Freddie Mac. These agencies play a pivotal role in standardizing mortgage lending practices across the United States.

Flexibility with down payment

One common misconception about conventional loans is that they necessitate a hefty 20% down payment. While a substantial down payment can indeed lead to lower interest rates, conventional loans are more flexible than you might think. In fact, you can secure a conventional loan with as little as a 3% down payment. It’s important to note that if your down payment is less than 20%, your lender will typically require you to pay monthly private mortgage insurance (PMI). PMI provides protection to the lender in case you default on your loan, making it a viable option for borrowers with lower down payments.

The importance of your credit score

Your credit score plays a crucial role in determining the terms of your conventional loan. Generally, the better your credit score, the lower your interest rate will be. Conventional loans offer borrowers with strong credit histories the opportunity to secure more favorable loan terms, which can result in lower monthly payments and overall interest costs.


Benefits of conventional loans

  1. Competitive interest rates: For borrowers with excellent credit scores, conventional loans often come with highly competitive interest rates, making homeownership more affordable over time.
  2. Low down payment options: Conventional loans provide flexibility in down payment requirements, allowing you to become a homeowner with as little as 3% down.
  3. No upfront mortgage insurance: Unlike FHA loans, which require an upfront mortgage insurance premium, conventional loans don’t have this additional cost.
  4. Versatility: Conventional loans offer greater versatility and flexibility when it comes to property types and usage, making them suitable for various housing options.


Is a conventional loan tight for you?

The decision to choose a conventional loan depends on your financial situation and goals. If you have a strong credit history or you can put a larger down payment, a conventional loan can provide you with excellent terms and lower overall costs. However, assessing your specific needs and discussing your options with a mortgage broker is essential to determine whether a conventional loan aligns with your homeownership aspirations.

In conclusion, conventional loans offer flexibility, competitive rates, and the potential for a lower down payment, making them an attractive choice for many homebuyers. Contact us today to explore whether a conventional loan is the right fit for your unique circumstances. We’re here to help you navigate the mortgage landscape and find the perfect financing solution for your homeownership journey!


Working with Solcosta Home Loans

  • Since we are a mortgage broker and not a bank, we have the ability to shop multiple lenders to get you the best deal possible.
  • We offer a wide variety of loan products, and we can help you find the loan that is right for you!
  • We are fast and efficient and have the ability to close most of our loans in 18 days or less.
  • We are locally owned and operated in Northern California. That means when you call or email us, you will be speaking with us directly.
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