Conventional Loans

We've been helping customers afford the home of their dreams for many years and we love what we do.

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What is a conventional loan?

Conventional loans are growing in popularity thanks to low rates and increasingly flexible guidelines.

A conventional loan is one that is not formally backed by any government entity such as FHA, VA, and USDA. Rather, it is a loan that follows guidelines set by Fannie Mac and Freddie Mae, two agencies that help standardize mortgage lending in the U.S.

Conventional loans are also known as conforming loans because they “conform” to Fannie Mae and Freddie Mac standards.

Does the lack of government backing make conventional loans less desirable? Hardly.

While a conventional mortgage appeals to a wide demographic, it’s especially good for first-time borrowers with decent credit and some amount of down payment.

Low down payment conventional loans

It’s a myth that you need a 20 percent down payment for a conventional loan.

From the ten-percent-down piggyback loan to the three-percent-down HomeReadyTM and Conventional 97 loans, conventional low-down-payment options not only exist but are extremely popular with today’s buyers.

So, how do you qualify for a conventional loan? Simply by matching expectations set out by Fannie Mae and Freddie Mac.

Once you do that, you join the club of conventional loan homeowners who make up about 65% of the market.

In this article:

The amount of the borrower’s down payment can affect the interest rate and final loan costs..

A 20% down payment is not a requirement for a conventional loan
Private mortgage insurance, or PMI, is required for any conventional loan with less than a 20% down payment.

What are conventional mortgage advantages?

Like most loans, you have an option about how long you will be paying your mortgage.

Conventional loans come in 15, 20, 25, and thirty-year terms. Some lenders even offer 10-year conventional loans.

The shorter your loan term, the higher your monthly payment. Fortunately, a loan term of 30 years still comes with low fixed interest payments that help home buyers budget and cover the other costs of home ownership.

Conventional loans are also a smart choice for those who know they won’t remain in their house long and want a shorter-term, adjustable-rate mortgage. This option comes with a lower interest rate than that of a fixed-rate loan.

Adjustable rates are in fact fixed, but only for a period of time – usually 3, 5 or 7 years. During that initial “teaser” period, the homeowner pays ultra-low interest and can save thousands.

The glitch here is that if they don’t sell at the end of the loan’s life, the rate adjusts — maybe down, but also maybe up. It’s a gamble that they should discuss with their lender and financial advisor.

Another advantage to conventional loans is the lack of an upfront mortgage insurance fee, even if the buyer puts less than 20 percent down.

FHA loans, plus USDA mortgages and even VA loans require an upfront “funding fee” usually between 1% and 3% of the loan amount.

Conventional loans are actually the least restrictive of all loan types, in some respects.

Conventional loans only require a monthly mortgage insurance fee, and only when the homeowner puts down less than 20 percent. Plus, that mortgage insurance cost is often lower than that of government-backed loans.

Conventional loans are actually the least restrictive of all loan types, in some respects.

USDA loans require the property purchased to be in a designated rural area. This is fine for those who live and work in suburban and rural locations. However, for those in major cities, a USDA-eligible home could extend commuting distance beyond what is reasonable.

VA loans are exclusive to current and former military service members. They offer a lot of benefits, like zero down payment and no monthly mortgage insurance. But they are not available to the general population.

FHA loans are a powerful home buying tool, but can come with high upfront and monthly mortgage insurance fees that are payable for the life of the loan — up to 30 years. The only way to cancel FHA mortgage insurance is to refinance out of the FHA loan. This can incur additional costs.

First-time and repeat buyers can land a good value when they choose a conventional loan for their home purchase. And, more buyers qualify for this loan than you might expect.

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What We Offer

Another name for a jumbo mortgage is a non-conforming mortgage. This is a loan a lender makes you that doesn’t…
VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide…
Conventional loans are growing in popularity thanks to low rates and increasingly flexible guidelines.
FHA home loans are mortgages which are insured by the Federal Housing Administration (FHA), allowing borrowers to get low mortgage…
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Why People Choose Us

Commitment

We’ve been helping customers afford the home of their dreams for many years and we love what we do.

Trust

Our mission is to serve our customers with honesty, integrity and competence.

Savings

Our goal is to provide home loans to our clients while providing them with the lowest interest rates and closing costs possible.

Experience

Furthermore, we pledge to help borrowers overcome roadblocks that can arise while securing a loan.

MORTGAGES MADE SIMPLE

Our expertise is the difference

Jumbo Loans
Another name for a jumbo mortgage is a non-conforming mortgage. This is a loan a lender makes you that doesn’t…
Read more
VA Loans
VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide…
Read more
Conventional Loans
Conventional loans are growing in popularity thanks to low rates and increasingly flexible guidelines.
Read more
FHA Loans
FHA home loans are mortgages which are insured by the Federal Housing Administration (FHA), allowing borrowers to get low mortgage…
Read more

Questions? We'll Put You On A Right Path!

Contact Western Capital Lending today to discuss your mortgage loan options and find out which loan program will best suit your needs.

(480) 415-7969