Conventional Loans

Traditional financing with competitive rates and flexible terms

What is a Conventional Loan?

Conventional loans are mortgage loans that are not insured or guaranteed by the federal government. They're the most common type of home loan and offer competitive interest rates, flexible terms, and can be used for primary residences, second homes, and investment properties.

As a California loan officer, I help borrowers secure conventional financing with down payments as low as 3% for qualified first-time homebuyers, and 5% for repeat buyers. These loans conform to Fannie Mae and Freddie Mac guidelines.

Conventional Loan Benefits

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Low Down Payments

As low as 3% down for qualified borrowers

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Competitive Rates

Often lower rates than government loans for qualified borrowers

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Multiple Property Types

Primary residence, second home, or investment property

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PMI Removal

Cancel PMI when you reach 20% equity

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Higher Loan Limits

Up to $1,149,825 in high-cost California areas (2024)

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Flexible Terms

10, 15, 20, or 30-year fixed and adjustable rates

Conventional Loan Requirements

  • Credit Score: Minimum 620 (higher scores get better rates)
  • Down Payment: 3% - 20% (depends on loan type and property)
  • Debt-to-Income Ratio: Typically 43% or lower (50% possible with compensating factors)
  • Employment: 2 years of stable employment history
  • Income Documentation: Pay stubs, W-2s, tax returns
  • Reserves: 2-6 months recommended (varies by property type)
  • Property Appraisal: Required for all conventional loans

California Conventional Loan Limits (2024)

County 1 Unit 2 Units 3 Units 4 Units
Standard Limit $766,550 $981,500 $1,186,350 $1,474,400
High-Cost (LA, SF, SD, etc.) $1,149,825 $1,472,250 $1,779,525 $2,211,600

PMI (Private Mortgage Insurance)

If you put down less than 20%, you'll be required to pay PMI. This protects the lender if you default on the loan. The good news:

  • PMI can be as low as 0.3% to 1.5% of the original loan amount annually
  • PMI automatically terminates when you reach 78% LTV (loan-to-value)
  • You can request PMI removal at 80% LTV
  • PMI payments help you buy sooner rather than waiting to save 20%
  • Home appreciation can help you reach 20% equity faster

Conventional vs. Other Loan Types

Feature Conventional FHA VA
Min. Credit Score 620 580 620 (typically)
Min. Down Payment 3% 3.5% 0%
Mortgage Insurance PMI (removable) MIP (life of loan) None
Property Types All Primary only Primary only
Upfront Fees None 1.75% MIP 2.15% Funding Fee

Types of Conventional Loans

Conforming vs. Non-Conforming

Conforming Loans meet Fannie Mae and Freddie Mac guidelines for loan limits, credit, and documentation. These typically have the best rates.

Non-Conforming Loans (Jumbo) exceed the conforming loan limits. In high-cost California counties, loans over $1,149,825 are considered jumbo and may have different requirements.

Fixed-Rate Mortgages

The interest rate and monthly payment remain constant for the life of the loan. Available in:

  • 30-year fixed (most popular)
  • 20-year fixed
  • 15-year fixed (lower rates, higher payments)
  • 10-year fixed

Adjustable-Rate Mortgages (ARMs)

Interest rate is fixed for an initial period, then adjusts periodically. Common options:

  • 5/1 ARM (fixed 5 years, then adjusts annually)
  • 7/1 ARM (fixed 7 years, then adjusts annually)
  • 10/1 ARM (fixed 10 years, then adjusts annually)

ARMs typically offer lower initial rates but carry rate adjustment risk.

Ready to Apply for a Conventional Loan?

Let's find the perfect conventional mortgage for your California home purchase.

Calculate Payments Get Pre-Qualified Call (323) 393-5077