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Loan programs

Conventional Loans

Conventional loans aren’t insured by a government agency and generally follow guidelines set by Fannie Mae and Freddie Mac. They’re a flexible choice for buyers and homeowners with solid credit.

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Conventional loans at a glance

  • Fixed-rate options
  • Adjustable-rate options
  • Mortgage insurance you can remove
  • More property types

  • Fixed-rate options

    Your interest rate and principal-and-interest payment stay the same for the life of the loan.

  • Adjustable-rate options

    A lower starting rate for an initial period, then adjustments based on the market within set limits.

  • Mortgage insurance you can remove

    If your loan needs private mortgage insurance, it can be canceled once you build enough equity.

  • More property types

    Finance a primary home, a second home or an investment property.

Fixed or adjustable?

A fixed-rate mortgage keeps the same interest rate for as long as you have the loan, so your principal-and-interest payment never changes. It’s the most popular choice for buyers who plan to stay in their home.

An adjustable-rate mortgage (ARM) starts with a fixed rate for an initial period. After that, the rate adjusts periodically based on a market index plus a margin, within caps set in your loan documents. An ARM can make sense if you expect to sell or refinance before the first adjustment.

Private mortgage insurance

Conventional loans with a smaller down payment usually include private mortgage insurance (PMI). Unlike FHA mortgage insurance, PMI doesn’t last forever: you can request cancellation once your balance reaches 80% of your home’s original value, and it ends automatically at 78%.

Who conventional loans fit best

  • Buyers and homeowners with good credit and steady income
  • Buyers purchasing a second home or an investment property
  • FHA borrowers who have built enough equity to drop mortgage insurance

FAQ

Conventional loans: common questions

What is a conforming loan?

A conforming loan is a conventional loan that meets Fannie Mae and Freddie Mac guidelines, including their loan limits. Conforming loans often have more favorable pricing than jumbo loans.

How does private mortgage insurance (PMI) work?

PMI protects the lender on conventional loans with a smaller down payment. You can ask to cancel it once your balance reaches 80% of your home’s original value, and it ends automatically at 78% if you’re current on your payments.

Should I choose a fixed or adjustable rate?

A fixed rate offers a stable payment for as long as you keep the loan. An adjustable rate can start lower, which may suit you if you plan to sell or refinance before the rate begins to adjust. We’ll walk through both.

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