Conventional Loans

What Is a Conventional Loan?

Conventional loans are mortgage loans offered by non-government sponsored lenders. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate. These loans are usually a better fit for borrowers that have higher credit scores and their own down payment.  Although this is not necessary when we offer the Wheda No Down Payment Loan.

While many think that a 20% down payment is required for all conventional loans, many lenders now offer low down payment options with as little as 3% down for first time home buyers.  These options also come with no mortgage insurance if desired.

Who Qualifies for a Conventional Loan?

The best candidates for conventional financing are higher credit scores, 700 and above, with at at least a 3% down payment.  There are other options that allow conventional financing with our Down payment assistance programs.  Because Fannie Mae and Freddie Mac have certain guidelines associated with their conventional loans, they like to see people with multiple trade lines on their credit that are at least 1 year old each.  If you are unfamiliar with how trade lines on your credit are established I’ve included a video:

What Is The Difference Between a Conventional Loan and FHA Loan?

The primary difference between these two loans are the institutions that back them.  Conventional loans are bought and sold on the open market by Fannie Mae and Freddie Mac, large wholesale mortgage holders.  FHA Loans are backed by the Department of Housing and Urban Development (HUD).  These institutions both have different guidelines in which they will accept the loans that lenders produce.  When a loan is originated at the by a loan officer to a client it is funded by a mortgage company, typically a mortgage broker or bank, and held by a wholesale mortgage lender.  This loan is then packaged along with other loans like it (conventional or FHA) and sold in “bundles” to a larger wholesale service provider like Fannie Mae and Freddie Mac.  In order for these loans to be eligible for resale to the larger companies, they must meet certain guidelines.  These guidelines include credit worthiness, income requirements, debt requirements and loan limit requirements.

 How Much Can You Borrower With a Conventional Loan?

Just like FHA Loans  and VA Loans  there are loan limits that apply.  conventional loan limits can be found Here.  But vary by state, some areas have higher priced real estate and therefor have higher loan limits.

Maximum Loan Amount for 2018

Units Contiguous States, District of Columbia, and Puerto Rico Alaska, Guam, Hawaii, and the U.S. Virgin Islands
1 $453,100 $679,650
2 $580,150 $870,225
3 $701,250 $1,051,875
4 $871,450 $1,307,175

What Can You Buy With a Conventional Loan?

Conventional loans are residential mortgages, therefore you can purchase single family housing and buildings that contain up to 4 residential units.  This means you can purchase an investment property or apartment house that contains 1-4 units.  You are able to purchase non owner occupied investment properties with a conventional loan as well.  If you intend to buy an investment property you will be subject to higher down payments if you do not intend to occupy it.

How Do I Know If I Qualify For a Conventional Loan?

Each loan is designed just a little differently, the best way to find out if a conventional loan is best for you would be to talk to a qualified mortgage professional.  You can ask a professional here or you can apply here.  If technology isn’t your game then feel free to call or email me, my contact information is below.


Justin Scott

NMLS 878581

(920) 530 4484

909 E Walnut Street

Green Bay, WI