Conventional Loan
Conventional loans are one of the most common mortgage options available today. They’re not insured or guaranteed by a government agency (like FHA or VA loans) but are instead backed by private lenders. These loans often conform to the standards set by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation)—two government-sponsored enterprises (GSEs) that help stabilize the mortgage market.
A Brief History:
-
Fannie Mae was created in 1938 during the Great Depression as part of the New Deal. Its mission was to increase access to home financing by creating a secondary mortgage market. Essentially, it allowed lenders to sell their loans, freeing up funds to issue more mortgages.
-
Freddie Mac was established later in 1970 to further promote competition in the secondary mortgage market and make homeownership more accessible to Americans.
Both organizations purchase mortgages from lenders, package them into mortgage-backed securities (MBS), and sell them to investors. This process ensures liquidity in the housing market, making it easier for borrowers like you to secure loans with fair terms and interest rates.
Pros of Conventional Loans
Cons of Conventional Loans
Conventional Loan Limit and Max Purchase Prices
For 2025, the conventional loan limit is $806,500 (though limits may vary in high-cost areas). Here’s a breakdown of the maximum purchase price you can achieve with different down payment percentages:
Looking at homes above these price points? Don’t worry—we can help you explore jumbo loan options to make your dream home a reality.
Who Is a Conventional Loan Perfect For?
Conventional loans are an excellent choice if you:
-
Have a credit score of 680 or higher.
-
Can comfortably make a 3%–20% down payment.
-
Want to avoid government-backed loan fees (like FHA’s upfront MIP).
-
Plan to purchase a primary residence, second home, or investment property.
-
Are seeking a competitive mortgage rate with flexible term options.
Special Feature: 3% Down for First-Time Homebuyers
Did you know first-time homebuyers can qualify for a conventional loan with as little as 3% down? This program is ideal for those just starting their homeownership journey.
Who Qualifies as a First-Time Homebuyer?
It’s simpler than you think! You’re considered a first-time homebuyer if you haven’t owned a home in the last 36 months. So, even if you’ve owned a home in the past, you might still qualify if it’s been over three years.
