What Are Conventional Loans?
Conventional loans are mortgage loans that are not backed or insured by the government (such as FHA, VA, or USDA loans). Instead, they generally follow the lending standards set by Fannie Mae or Freddie Mac. These loans often offer more favorable interest rates, terms, and lower fees compared to other loan types. However, they typically require borrowers to have good to excellent credit, manageable monthly debt, a steady income, and a down payment ranging from 5% to 20%. Conventional mortgages are well-suited for buyers with strong credit profiles and the ability to make at least a 5% down payment.
Types of Conventional Loans
Fixed-Rate Mortgages:
With a fixed-rate mortgage, both your interest rate and monthly payment remain constant for the life of the loan.
- 30-Year Fixed Loan
Benefit: Offers the lowest fixed monthly payments, ideal for long-term affordability. - 20-Year Fixed Loan
Benefit: Lower monthly payments with a shorter term than the 30-year option. - 15-Year Fixed Loan
Benefit: Lower interest rate compared to 20- and 30-year loans; pay off your mortgage faster and save on interest. - 10-Year Fixed Loan
Benefit: Even lower rates; allows for quicker payoff and faster equity building. - 5-Year Fixed Loan
Benefit: Offers the lowest interest rate; fastest route to full repayment and equity growth.
Adjustable-Rate Mortgages (ARMs):
These loans begin with a fixed interest rate for a set number of years, after which the rate adjusts annually based on market conditions.
3/1 ARM
Structure: Fixed rate for the first 3 years, then adjusts annually for the remaining 27 years.
5/1 ARM
Structure: Fixed rate for the first 5 years, then adjusts annually for the remaining 25 years.
7/1 ARM
Structure: Fixed rate for the first 7 years, then adjusts annually for the remaining 23 years.
These options are ideal for borrowers who plan to move or refinance before the adjustable period begins.
What Are the Down Payment Requirements for Conventional Loans?
For purchase transactions, conventional loans typically require homebuyers to make a down payment of 5% to 20% of the home's purchase price. For refinance transactions, most lenders require the borrower to have at least 10% equity in the property to qualify.
What types of property are eligible?
Most conventional loan programs permit financing for single-family homes, warrantable condominiums, planned unit developments, and 1- to 4-family residences. These loans can be used to purchase a primary residence, a second home, or an investment property.
Who Is a Conventional Loan Best For?
Conventional home loans are an excellent option for borrowers with strong credit, stable income, and the ability to make a down payment of at least 5%. If you prefer not to use government-backed programs and want greater flexibility, a conventional loan might be the right fit. With excellent credit, you could qualify for some of the most competitive mortgage rates available. Whether you’re a first-time buyer or looking to upgrade, conventional loans offer attractive options that can lead to long-term savings. We partner with top conventional loan lenders to help you find the perfect mortgage tailored to your needs.
Why Work With Coast 2 Coast Mortgage?
When it comes to conventional home loans, you deserve expert guidance—without any pressure. As an independent broker in Texas, I shop around to find the best conventional mortgage loan tailored to your needs. Whether you're buying your first home or refinancing, I’ll help you secure competitive rates with no hard credit pulls. Clients trust me as one of the top conventional loan lenders in the area. If you want a conventional mortgage partner who truly listens and delivers, I’m here to support you every step of the way.
FAQs About Conventional Loans
✔ What is a conventional home loan?
A conventional home loan is a mortgage not backed by government programs like FHA, VA, or USDA. It adheres to the lending guidelines set by Fannie Mae or Freddie Mac and typically offers better terms for borrowers with strong credit and stable income.
✔ How much do I need for a down payment?
Most conventional loans require a down payment between 5% and 20%. Putting down more can improve your chances of securing a better interest rate and may help you avoid paying mortgage insurance.
✔ Are conventional mortgage loan rates better than other loan types?
Generally, yes. If you have good credit and solid financial standing, conventional mortgage rates tend to be lower than those of government-backed loans. They also offer more flexibility in terms and options.
✔ How do I find the best conventional mortgage loan for me?
The ideal conventional loan depends on your budget, credit profile, and long-term plans. Chet, can guide you through comparing options to find the loan that best fits your needs.
✔ Who are the best conventional loan lenders in TX?
At Coast2Coast Mortgage, we take pride in being one of the top conventional loan lenders in TX. With extensive experience and personalized service, we’re dedicated to helping you secure the right conventional mortgage.
✔ Can I use a conventional loan to buy a second home or investment property?
Absolutely! Conventional loans can be used to finance a primary residence, a second home, or an investment property.
