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For Typical Homebuyers

Conventional Loans
(Your 2019 Guide)

Headquartered in Riverside, Calif., Secure Choice Lending is a mortgage lender committed to helping prospective and current homeowners finance their dreams. Reachable by phone, online or in-person, Secure Choice Lending prides itself on customer service, on serving your real estate needs day or night.

Whether you are experienced in today’s marketplace or new to the industry, our staff will streamline the mortgage loan process so you can enjoy the present and the future.

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What you need is Secure Choice Lending.

Call our office at (951) 733-8925 to solve your questions and assuage your concerns.

Summary

What is Conventional Loan?

A conventional loan is a mortgage that is not guaranteed or insured by the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA) or any other government agency.

These loans are geared toward borrowers with higher credit scores and, at times, larger available funds for a down payment (typically 5-20%).

Conventional loans have products that provide borrowers more flexibility. Additionally, private mortgage insurance, or PMI, is removed at an LTV (loan-to-value) ratio of 80% or less.

It is likely you have heard of conventional loans before, either from your own research or a lender’s recommendation. This is because conventional loans are more commonly used than other government-guaranteed loans, such as FHA loans and VA loans.

In fact, according to the government census, conventional loans were used for 75% of all new home sales in the last quarter of 2018(1).

What are the Benefits of the
Conventional Loan?

If you have a high credit score, and you have saved enough to make a down payment of up to 20%, a conventional loan is likely the right choice for you.

  • Even if you have less than 20% to put toward a down payment, there is no upfront mortgage insurance fee. Government-backed loans require an upfront funding fee of about 1-3% of the total loan amount.
  • Interest rates are low.
  • If you are not long for your new home, the adjustable-rate mortgage loan option is available. It has a lower interest rate than the fixed-rate loan option.
  • If you can put 20% down, you are not required to get mortgage insurance.
  • Fixed-rate mortgage loan options have term lengths ranging from 10 to 30 years.
  • Because conventional loans are not backed by the government, there are less restrictions than their government-backed peers. For example, conventional loans can be used to purchase a primary residence, a secondary home, a vacation property or a rental property. Government-backed loans can only be used to buy a primary residence.
Varieties of Loans

What are the Different Types of
Conventional Loans?

There are two types of conventional loans.

Conforming Conventional Loan

  • Conforming conventional loans have terms and conditions that must meet the funding criteria of Fannie Mae and Freddie Mac.
  • Fannie Mae, or the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corporation, are government-sponsored entities that purchase mortgages from private lenders.
  • One key condition that Fannie Mae and Freddie Mac imposes is the loan limit. Conforming loans must not exceed the loan limit set every year by the Federal Housing Finance Agency, or FHFA.
  • According to the FHFA, the maximum conforming loan limit for 2022 for one-unit properties in most of the U.S. is $647,200. You can click here to see a map that shows the 2020 maximum loan limits across the U.S.

Call our office at (951) 733-8925 to solve your questions and assuage your concerns.

Non-Conforming Conventional Loan

  • Conventional loans that exceed the set loan limit are considered non-conforming conventional loans. Also referred to as Jumbo Loans, non-conforming conventional loans are not purchased by Fannie Mae or Freddie Mac because they exceed the loan limit.
  • Non-conforming loans are funded by private institutions or lenders.

Call our office at (951) 733-8925 to solve your questions and assuage your concerns.

Financial Benefits

Conventional Loan Rates

Conventional loans make home-buying affordable for many people because of their low interest rates.

There are many benefits to conventional loans, for instance:

  • Interest rates for these loans change daily, sometimes on an hourly basis, because they are based on mortgage-backed securities (MBS) and are traded just like stocks, which fluctuate throughout the day.
  • When financial news hits the market, these rates go up or down, depending on the news.
  • Borrowers who are already approved and already have a property selected can lock in the lowest rates when rates go down.
    .
  • A high credit scores means a low interest rate.
  • A low credit score means a high one.
  • Published rates usually are based on the ideal borrower — that is, one with a high credit score and funds available for a 20% down payment. That said, it is best to talk to a loan officer about interest rates.

It’s that simple.

Get an ideal borrower

Call Secure Choice Lending at (951) 733-8925 to get a quote based on your information, not an ideal borrower’s.

Qualifications

How Do You Qualify
for a Conventional Loan?

You could be eligible for a
conventional loan if you meet the
following requirements:
  • Ideally, you have a credit score of at least 620. Some lenders set a higher minimum credit score requirement. After all, they are taking a greater risk. If you have a lower credit score, you may want to apply for an FHA loan instead..
  • You must be able to provide proof of income, including, but not limited to, recent pay stubs, W2s and tax returns.
  • Your assets must reflect that you have sufficient available funds for the down payment and other closing costs.
Down Payment Structure

Conventional Loan Down Payment

While there are no down payment guidelines or standards that lenders must abide by, the size of your down payment will affect the interest rates on your loan, as well as the final loan costs.

There are many benefits to
conventional loans, for instance:

  • Conventional Loan Options and Your Down Payment
  • Conventional loans typically require a higher down payment when compared to government-backed loans. Most lenders will ask you to put 5% down. However, you can put 10% or 20% down.
  • For large loan amounts, be prepared to provide an even higher down payment.
  • A large down payment will result in lower monthly mortgage costs. Moreover, a down payment of at least 20% on a conventional loan eliminates mortgage insurance, a perk that is not available for government-backed loans, which require borrowers pay mortgage insurance regardless of how much they put down.

The question of which loan is better depends on your situation. But keep in mind, if you have a low credit score or have precious little money for a down payment, you might not even qualify for a conventional loan.

Our Assistance

Secure Choice Lending Can Assist You With an Conventional Loan

There’s myriad information on conventional loans, and we know taking it all in at once can be pretty overwhelming.

But don’t panic!

Our loan officers are happy to answer all your questions and discuss your options.

Secure Choice Lending is a full-service mortgage broker that will secure you a mortgage that doesn’t break the bank.

To streamline the lending experience, our team of financial experts matches consumer needs with the appropriate loan programs and level of risk. With loan officers versed in all mortgage types, solutions to your home-buying questions are a phone call away.

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