Inside the Conventional Mortgage 💳
The Classic Loan Revealed: What Homebuyers Need to Know Now
Min Credit
620
Min Down
3%
Current Rate
6.50%
Market Share
70%
🏠 What is a Conventional Mortgage?
A conventional mortgage is a home loan backed by private lenders, following rules set by Fannie Mae and Freddie Mac but not insured by the federal government. It's America's favorite way to buy a home, accounting for close to 70% of all mortgages in 2024.
💰 Conforming vs. Jumbo Loans
Conforming Loans
- • Loan limit: Under $806,500
- • Follow Fannie Mae/Freddie Mac rules
- • Lower rates & easier approval
- • 90% of all mortgages
Jumbo Loans
- • Loan amount: $806,500+
- • Stricter requirements
- • Higher rates (0.25-0.75%)
- • 10-20% down payment
🔄 How It Works
Money flows from lenders to buyers, then gets sold to Fannie Mae or Freddie Mac. Your loan is bundled into a mortgage-backed security and sold to investors.
📊 5-Step Process
🎯 Types of Conventional Loans
Conventional 97: 3% Down
Perfect for first-time buyers. PMI required until 20% equity.
HomeReady & Home Possible
Low-to-moderate income programs with flexible debt-to-income ratios.
Renovation Loans
Bundle purchase + upgrades in one package for fixer-uppers.
Jumbo Loans
For homes over $806,500. Requires 700+ credit & 10-20% down.
✅ Who Should Choose Conventional?
🔑 Key Advantages
💰 Lower Insurance Costs
Excellent credit = lower PMI rates
🏠 Greater Flexibility
Works for homes, condos, townhouses, multi-unit (up to 4)
⚡ Fast Closing
30-45 days from application to closing
🎯 Remove PMI
Once you reach 20% equity, PMI can be removed
🚫 Myths Busted
❌ Myth: Need perfect credit (750+)
✓ Truth: Minimum 620, though 640+ gets better rates
❌ Myth: Must put down 20%
✓ Truth: 3% down with Conventional 97 + PMI
❌ Myth: Need minimum income
✓ Truth: Debt-to-income ratio matters (43% max), not income
❌ Myth: Gift money doesn't count
✓ Truth: Gift money absolutely counts with documentation
📊 2025 Market Snapshot
30-Year Fixed
6.26%
15-Year Fixed
5.68%
7/1 ARM
5.89%
Compare rates from multiple lenders to get the best deal.
💡 Bottom Line
Conventional mortgages remain the classic choice for smart buyers who want competitive rates, flexibility, and a path to removing insurance payments. Know the rules, check your financials, and you could be holding the keys to your new home.
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Sarah Mitchell
Senior Mortgage Advisor & VA Loan Specialist
Sarah Mitchell brings over 12 years of mortgage industry expertise, specializing in VA loans and first-time homebuyer programs. As a certified NMLS professional, she has helped thousands of veterans and military families achieve homeownership through specialized loan programs. Her deep understanding of VA benefits and down payment assistance programs makes her a trusted advisor for service members transitioning to civilian life.