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Conventional Mortgage

Unlike other loan types, these loans are not backed by the government. They are securitized by Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), and private lenders. These loans are popular options for borrowers with good credit, stable employment and income, and savings set aside for a down payment. Conventional loans are offered with a fixed or adjustable rate.

What are the biggest benefits of a conventional loan?

  • Conventional loans require a smaller down payment than a government-insured mortgage; this makes it easier to afford a home, particularly for first-time buyers.
  • No mortgage insurance is required with a 20% down payment; this may help borrowers save on monthly payments and reduce overall costs.
  • Conventional loans can be used to purchase a second home or an investment property.
  • Borrow a higher loan amount when compared to FHA.

What about low down payment options?

For conventional loans, there are a few: FannieMae HomeReady, Freddie Mac Home Possible, and Home Possible Advantage.

FannieMae HomeReady

This is a fixed-rate program designed to be an affordable option for creditworthy first-time homebuyers with low-to-moderate income. The homebuyers must make at or less than 80% AMI with LTVs up to 97% financing. To learn more about HomeReady, please click here.

Freddie Mac Home Possible & Home Possible Advantage

This program is designed for low-to-moderate-income first-time buyers or someone who is purchasing or refinancing properties in target areas and meets the max 80% AMI. Maximum financing (LTV/CLTV) and minimum credit score requirements are based on the loan product type. Mortgage insurance is required on all conventional loans with an LTV greater than 80 percent but will be at a reduced rate for FHLMC Home Possible and Home Possible Advantage. To learn more about these programs, please click here.

More information:

When Do I Need a Down Payment Ready? Everything You Need to Get Started

How Much House Can I Afford? The Answer is Different for Everyone

The Basics of Mortgage Insurance: What You Need to Know