Conventional Loans
Flexible Home Financing With Competitive Rates
Conventional loans through Howell Mortgage Group provide fixed-rate and adjustable-rate home financing backed by Fannie Mae and Freddie Mac guidelines. With down payments starting at 3% and the ability to cancel private mortgage insurance at 20% equity, conventional mortgages remain the most widely used loan option for primary residences, second homes, and investment properties.
What Is a Conventional Loan?
Conventional mortgages come in two primary structures. Fixed-rate loans lock your interest rate for the entire repayment term, giving you predictable monthly payments over 15, 20, or 30 years. Adjustable-rate mortgages (ARMs) offer a lower introductory rate for a set period, typically 5 or 7 years, before adjusting annually based on a market index.
Because no government backing exists, lenders carry more risk on conventional loans. As a result, qualification standards are somewhat stricter than government-backed programs. However, borrowers who meet these standards benefit from lower total loan costs, no upfront mortgage insurance premiums, and the ability to cancel PMI once they reach 20% equity.
Requirements and Qualifications
Credit Score
A minimum FICO score of 620 is required for most conventional programs. Borrowers above 740 typically receive the best available interest rates and lowest PMI premiums.
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Income Documentation
Two years of W-2s or tax returns, recent pay stubs covering 30 days, and employment verification are standard. Self-employed borrowers need two years of filed tax returns plus a year-to-date profit and loss statement.
Down Payment
Minimum 3% for first-time buyers through Fannie Mae HomeReady or Freddie Mac Home Possible programs. A 20% down payment eliminates the need for private mortgage insurance entirely.
Property Appraisal
An independent licensed appraiser must confirm the property value meets or exceeds the loan amount. The home must meet minimum habitability and safety standards.
Debt-to-Income Ratio
Lenders generally cap DTI at 45%, though some allow up to 50% with strong compensating factors such as high reserves or excellent credit.
Cash Reserves
Depending on the loan amount and property type, lenders may require liquid assets equal to two to six months of mortgage payments after closing.
How Conventional Loans Work
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Get Pre-Approved
Submit income documentation, authorize a credit pull, and receive a pre-approval letter that shows sellers you are a qualified buyer with verified financing capacity. -
Select Your Loan Program
Choose between fixed-rate stability or adjustable-rate savings. You loan officer will compare rate sheets and help you select the term that matches your financial goals. -
Submit the Full Application
Complete the Uniform Residential Loan Application (Form 1003) along with all supporting documents including bank statements, tax returns, and identification. -
Underwriting and Appraisal
The lender’s underwriting team reviews every detail of your application while an independent appraiser confirms the property’s market value. -
Conditional Approval
If the underwriter needs additional documentation, such as an updated bank statement or a letter of explanation, you will receive a conditions list to satisfy. -
Clear to Close
Once all conditions are met, your loan receives final approval. Review the closing disclosure, sign the documents at the title company, fund the loan, and receive your keys.
Benefits of Conventional Loans
No Upfront
Mortgage Insurance
Unlike FHA loans that charge a 1.75% upfront MIP at closing, conventional loans have no equivalent upfront insurance fee, reducing your cash needed at the closing table.
Competitive
Interest Rates
Borrowers with credit scores above 720 and down payments of 20% or more consistently receive the lowest available mortgage rates in the market.
PMI Cancellation
Private mortgage insurance is automatically removed when your loan balance reaches 78% of the original appraised value, or you can request removal at 80% through a new appraisal.
Property Appraisal
An independent licensed appraiser must confirm the property value meets or exceeds the loan amount. The home must meet minimum habitability and safety standards.
Flexible Property Types
Conventional financing works for primary residences, second homes, vacation properties, and investment properties up to four units, all under one loan program.
Higher Loan Limits
For 2027, conforming loan limits reach $845,000 in most areas and up to $1,249,125 in designated high-cost counties, covering the majority of home purchases.
Who Should Consider a Conventional Loan?
Conventional mortgages are designed for borrowers who have established credit histories, stable employment, and enough savings for at least a modest down payment. If your credit score is 620 or higher and you can document consistent income, this loan type should be at the top of your list.
First-time homebuyers benefit from low-down-payment conventional options like Fannie Mae HomeReady, which requires just 3% down and allows income from non-occupant co-borrowers. Move-up buyers and those purchasing second homes or investment properties also find conventional loans advantageous because government-backed programs like FHA and VA restrict these property types.
If you plan to stay in your home long-term and want predictable monthly payments, a 30-year fixed conventional loan offers the stability of a locked rate for three decades. If you expect to sell or refinance within 5 to 7 years, an ARM can save thousands in interest during the initial fixed period.
How Does This Compare?
Feature | Conventional | FHA | VA |
|---|---|---|---|
Upfront Fees | None | 1.75% MIP | VA funding fee 1.25-3.3% |
Property Types | Primary, 2nd home, investment | Primary only | Primary only |
Loan Limits | $832,750 | $541,287 | No limit |
Mortgage Insurance | PMI (removable at 20%) | MIP (life of loan) | None (funding fee instead) |
Down Payment | 3%-20% | 3.5% | 0% |
Minimum Credit Score | 620 | 580 | No official mimimum |