Delmar Mortgage

Conventional Loans

Loan Types

In the process of becoming a homeowner? Then you already know the value—both figuratively and literally—of a good loan. But with so many different kinds of loans to choose from, it can be hard to decide which one is best for your financial situation.

By far the most popular type of residential loan in the United States is the conventional loan. Here is how this loan could help you realize your dream of owning a home.

    Why Choose Conventional Loans?

    Conventional home loans are a type of mortgage loan that are not backed by a federal government agency, unlike USDA loans, FHA loans, and VA loans. Conventional loans can include both fixed-rate mortgages and adjustable-rate mortgages alike. Life of the loan varies, but people most often choose a loan term of 30 years in the US.

    Important: Conventional loans are not to be confused with conforming loans. Conforming loans meet requirements set by Freddie Mac and Fannie Mae while also meeting conforming loan limits. They are the alternative to nonconforming loans, which, as the name suggests, do not conform to those requirements.

    Benefits of Conventional Loans

    By far the largest benefit to this loan type is that it allows for a low down payment (as low as 3%!), meaning someone with less saved up for the upfront cost of a new home can find great value in conventional mortgage loans. As such, this loan is great for first-time homebuyers who don’t have equity in another property to help fund a larger down payment.

    Alternatively, when down payments are 20% or higher, someone does not need to purchase private mortgage insurance (PMI) with this loan type; this is in contrast to other types of loans, like USDA loans, which require PMI no matter how large the down payment is. As such, choosing conventional loans while placing a higher down payment can mean cutting out the cost of a monthly mortgage insurance premium.

    The largest downside to conventional loans? They often come with higher rates than other loan types, like FHA loans. Requirements for these loans are also usually stricter, so they are not for people with a lower credit score and a high debt-to-income (DTI) ratio.

    Want to learn more? Contact us about your mortgage options today.

    Conventional Loan

    Mortgage lenders typically determine rates based on the following factors:

    • Loan term,
    • Borrower’s credit history and credit score, which includes information like the person’s debt-to-income ratio and number of open credit cards,
    • Loan amount and closing costs,
    • Loan-to-value ratio,
    • Market refinance rates (if refinancing),
    • If the loan is adjustable or fixed rate, and
    • Whether the loan is for a single-family home/primary residence, second home, investment property, or something else.

    Conventional Loan Limits

    Conventional loan limits vary by year and location. According to the Federal Housing Finance Agency (FHFA), the national baseline limit for 2022 is $647,200. This amount may be higher in high-cost areas.

    Any amount exceeding this limit makes the loan a jumbo loan, a loan type that has traditionally had higher interest rates than conventional loans.

    Calculate Your Conventional
    Loan Rate

    Quickly determine what your interest rate and monthly payments could be with our FREE mortgage calculator.

    Want to learn more? Contact us today to discuss your conventional loan options.

    Conventional Loan

    This loan type often has stricter requirements than other kinds of loans. Requirements you will need to meet in order to qualify for this loan include:

    • A good credit score (learn more below),
    • Stable employment history,
    • Proof of ability to make mortgage payments,
    • A home appraisal,
    • A debt-to-income ratio no higher than 45%, and
    • A certain down payment amount (learn more below).

    A lower DTI ratio and larger down payment can maximize the benefits of this loan type while minimizing its drawbacks.

    Credit Score Requirements

    To qualify for this loan type, you need a credit score of at least 620. Some lenders may require a higher score.

    Down Payment Requirements

    To qualify for this loan type, you must meet a 3% minimum down payment requirement (with PMI). With a down payment amount of 20% or more, no PMI is required.

    Learn more about your eligibility for our adjustable and fixed-rate loan programs today.

    Apply for a Conventional
    Mortgage Loan with Delmar Mortgage

    Don’t let your dreams of homeownership remain dreams. We promise to do right by you by being upfront with you about your options of financing a new home. Every single day, we use our decades of industry experience to help everyday people and families find solutions that work for their financial situation, helping them achieve their financial goals while also making the entire process much less stressful. The result? Our people can focus on what really matters in life.

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