Conventional Loan
A conventional loan is a mortgage that is not insured or guaranteed by a government agency like the FHA, VA, or USDA. These loans are offered by private lenders and are ideal for borrowers with strong credit and financial stability. Conventional loans are versatile and can be used to purchase a primary residence, a second home, or an investment property.
Key Features of Conventional Loans
Loan Limits
Conforming loans adhere to loan limits set by the Federal Housing Finance Agency (FHFA), currently $832,750 in most areas and higher in high-cost regions. Conforming loan limits are set annually by the FHFA. The figures shown reflect 2026 loan limits. Non-conforming loans (Jumbo loans) exceed these limits for higher-value properties.
Down Payment Flexibility
Minimum down payments start as low as 3% for qualified buyers. A 20% down payment eliminates the need for private mortgage insurance (PMI).
Private Mortgage Insurance (PMI)
Required for down payments below 20%. Can be canceled once the borrower's home equity reaches 20%.
Credit Requirements
Minimum credit score of 620, with better terms offered to borrowers with scores above 740.
Loan Terms
Options include fixed-rate loans (e.g., 15, 20, or 30 years) and adjustable-rate mortgages (ARMs), which start with lower initial rates.
Uses
Can finance a variety of property types, including single-family homes, condos, and multifamily residences. Suitable for primary homes, vacation properties, or rental investments.
Advantages
Lower borrowing costs, flexibility in property types, no upfront mortgage insurance premium like FHA loans, and removable PMI once equity reaches 20%.
Disadvantages
Stricter credit and income requirements compared to FHA loans and potentially larger down payment requirements than government-backed alternatives.
Is a Conventional Loan Right for You?
Conventional loans suit borrowers with good credit, stable income, and down payment savings. They offer competitive rates and flexibility for homebuyers and investors.
The down payment percentages, credit score requirements, and loan limits referenced above are general program guidelines and do not constitute an offer or commitment to lend at those terms. Actual rates, Annual Percentage Rate (APR), repayment terms, and eligibility requirements are determined based on your individual credit profile, property type, loan amount, and other factors. Rates are subject to change without notice. Contact NNB Financial, Inc (NMLS #2435057) for current program details and a personalized quote.