Conventional Mortgages

What Is a Conventional Mortgage?

A conventional mortgage is a home loan offered by a private lender that is not insured or guaranteed by the federal government. Many conventional loans fall within conforming loan limits set for Fannie Mae and Freddie Mac, while some may be considered non-conforming if they exceed those limits or follow different guidelines.

Conventional home loans can be used for:

• Primary residences

• Second homes

• Investment properties

• Home purchases

• Rate-and-term refinances

• Cash-out refinances

How Conventional Loans Work

Conventional loans typically require a review of your credit, income, assets, employment, and the property being financed. Depending on the scenario, conventional mortgage options may allow for a relatively low down payment, while borrowers who put down less than 20% usually pay private mortgage insurance, also known as PMI.

Conventional mortgages may come with:

• Fixed-rate options

• Adjustable-rate options

• Different loan term choices

• Financing for several occupancy types

• The ability to remove PMI in some situations once enough equity is reached

Benefits of a Conventional Mortgage

Conventional mortgages are popular because they may offer:

• Competitive interest rates

• Flexible loan terms

• Low down payment options for qualified buyers

• Financing for primary, second, and investment properties

• Potential to remove PMI later

• A strong option for both purchase and refinance transactions

Conventional Loan May Be Best For

A conventional mortgage may be a good fit for borrowers who:

• Have good credit or strong overall loan qualifications

• Want to buy a primary residence, second home, or investment property

• Are looking for flexible down payment options

• Want to avoid some of the long-term mortgage insurance costs associated with certain government-backed loans

• Want to refinance into a new rate or term

Conventional Loan Requirements

Conventional loan requirements vary based on the property type, occupancy, down payment, credit profile, and overall file strength. In general, lenders review:

• Credit score

• Income and employment

• Debt-to-income ratio

• Assets and reserves

• Appraised property value

• Loan amount

• Occupancy type

Because guidelines can vary, the best way to compare options is to review your exact scenario with a mortgage broker.

Conventional Loan vs FHA

Both conventional and FHA loans can be strong options, but they work differently.

A conventional mortgage may be better for a borrower with stronger credit, more flexibility on property type, or a goal of removing PMI later. FHA loans may be helpful for borrowers who need more flexible credit qualification or lower minimum down payment options, but FHA mortgage insurance can work differently and may last longer depending on the loan structure.

Conventional Mortgage FAQs

What is a conventional mortgage?

A conventional mortgage is a home loan not backed by the federal government.

How much down payment is needed for a conventional loan?

The required down payment depends on the loan program, occupancy type, and borrower profile.

Do conventional loans require PMI?

If you put down less than 20%, PMI is often required.

Can PMI be removed on a conventional loan?

In many cases, yes, once sufficient equity is reached and program requirements are met.

Can conventional loans be used for investment properties?

Yes, many conventional loan programs allow financing for investment properties.

Is a conventional loan better than FHA?

It depends on your credit, down payment, and long-term goals.

Conventional Mortgage Options in Indiana

We help borrowers compare conventional mortgage options for home purchases and refinances throughout Indiana.

Ready to Compare Conventional Loan Options?