What is a conventional loan?
Conventional loans are often simply called “mortgages.” They are offered by private lenders without the backing of a government agency. You can buy, refinance, and get cash from your home’s equity with conventional loans. When you have good credit and finances, conventional loans can offer you competitive interest rates and favorable terms. You can finance more kinds of houses with conventional loans compared to other mortgage types. You can often borrow more money to finance more expensive homes too.
Freedom Mortgage was a top residential lender in the United States in 2021 according to Inside Mortgage Finance, 2021.
Conventional Home Purchase
- All homebuyers who meet lender requirements can qualify
- Competitive interest rates with good credit and finances
- No mortgage insurance with 20% down payment.
- Can use to purchase primary homes, vacation homes, rental homes, or investment properties
Conventional Refinances
- Can refinance any mortgage type with a conventional loan
- Competitive interest rates with good credit and finances
- No mortgage insurance with 20% home equity.
- Can use to refinance primary homes, vacation homes, rental homes, and investment properties
Conventional Cash Out Refinances
- Get cash from the value of your home’s equity
- Homes with any existing mortgage types can qualify
- Competitive interest rates with good credit and finances
- Pay for educations and home improvement or consolidate debt
Ask us what rate we can offer you
The rate we may be able to offer you is influenced by many things. Your interest rate may be affected by whether you want to buy a home, refinance a home, or get cash from your home’s equity with a conventional loan. Your credit score, your finances and income, as well as today’s mortgage market can also affect your rate. Freedom Mortgage may be able to offer you an interest rate that is lower – or higher – than rates offered by other lenders. Ask us today what rate on a conventional loan we can offer you.
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Learn more about conventional loans
Our education articles answer your questions about how to buy a home, refinance a home, or get cash from your home equity with a conventional mortgage.
How much money do you need to buy a house?
Decide whether can afford to buy a home
FHA vs. conventional loans
Learn the differences between FHA and conventional loans
Mortgage rate vs. APR. What are the differences?
Annual percentage rate (APR) helps you understand a mortgage's total cost.
Refinance an FHA loan to a conventional loan
Learn how it might help you save on mortgage insurance
Conventional loan FAQs
A conventional loan is also called a “traditional mortgage.” They’re offered by private lenders without backing by a government agency. They can be used for buying or refinancing primary homes, vacations homes, rental properties, and investment properties. Conventional loans can offer your competitive rates and terms but can have higher credit, income, and financial requirements than other mortgages.
Yes, it is possible to have more than one conventional loan. This is different than the rules for mortgages backed by the federal government like FHA loans. With loans backed by the government, you are generally limited to having one mortgage at a time.
Yes, you can refinance your mortgage with conventional loans. One advantage of refinancing with a conventional loan is that you may be able to avoid paying for mortgage insurance if the value of your home’s equity is 20% or more. As a result, homeowners with FHA loans sometimes refinance with a conventional loan to stop paying mortgage insurance.
Yes, you can borrow cash from the value of your home’s equity with a conventional loan. To get your refinance approved, you will need a significant amount of equity and you will need to meet credit, income, and financial requirements. Learn more about borrowing from your equity with a cash out refinance. Keep in mind by refinancing, the total finance charges you pay may be higher over the life of the loan.
Yes, conventional loans require down payments. Lenders often require a minimum down payment of 5% with conventional loans. If you make a 20% down payment or more, you won’t pay for private mortgage insurance. Learn more about down payments when you buy a home.
Conventional loans often have private mortgage insurance (PMI). If you make a down payment with a conventional loan of at least 20%, you will not have to pay PMI. If your down payment is less than 20% of the loan, you will be required to pay PMI. Mortgage insurance protects the lender when a borrower defaults on a mortgage.
Yes, PMI can be removed from a conventional loan under certain circumstances. Once your home equity reaches 20%, you can request your PMI payments be cancelled. The ability to stop paying for mortgage insurance is one of the benefits of conventional loans. Read more about removing PMI from your mortgage.
Yes, conventional loans come with closing costs. Closing costs can include appraisal fees, property insurance, mortgage discount points, and property taxes. You’ll often pay between 2% to 5% of the purchase price in closing costs with a conventional loan according to Freddie Mac. Learn more about closing costs.
Paying off your conventional loan early is also called “prepayment.” Prepayment can help you save money on interest by paying off your loan sooner. Before you prepay your conventional loan, check to see if your lender has prepayment penalties. These penalties can reduce how much you save. Freedom Mortgage does not charge prepayment penalties on its loans.
Anyone who meets a lender’s credit, financial, and income requirements can qualify for a conventional loan. These include credit score, debt-to-income ratio requirements, loan-to-value ratio requirements, and more. You will need to provide income and financial documents with your application. You’ll also have to pay for closing costs and mortgage insurance if your down payment is less than 20%. Learn more about how to apply for a mortgage.
Credit score requirements for conventional loans vary by lender. At Freedom Mortgage, we can usually accept a minimum credit score for conventional loans of 620. Keep in mind that you’ll also need to meet income and financial requirements to get approved for a conventional mortgage.
There are no minimum income requirements for conventional loans. However, your income does affect whether you will be approved for a mortgage. Most lenders will calculate your debt-to-income ratio when they review your application for a conventional loan and require you to meet their debt-to-income ratio standards.
In 2022, you can borrow up to $647,200 with a conventional loan that conforms to the limits set for mortgages that can be acquired by Fannie Mae and Freddie Mac. These are often called "conforming" mortgages. You may be able to borrow more than this limit with a jumbo loan. Learn more about conventional loan limits.
Lenders typically require an appraisal when you buy a home with a conventional loan. Appraisals estimate how much a property is worth and can affect your loan-to-value ratio which is an important number to understand when you are financing a house. You may also need an appraisal when you refinance. Learn more about home appraisals.
You can buy and refinance primary homes, vacation homes, rental properties, and investment properties with conventional loans. This is different than homes financed with government-backed mortgages. You can only buy or refinance primary homes with VA, FHA, and USDA loans.
You can use a conventional loan to buy a home in any community in the United States. The same is true for VA and FHA loans. USDA loans are different. You can only use USDA loans to finance houses in rural and certain suburban communities.