Pilgrim Mortgage

Conventional Loans

Conventional Loans

Some loans, like FHA, VA, and USDA loans, are backed by government agencies. Conventional loans aren’t. This isn’t a positive or negative, they’re just different! Instead, they follow guidelines set by Fannie Mae and Freddie Mac, two companies that help keep money flowing into the mortgage market.

So, what does that mean for you? Conventional loans tend to reward strong credit and give you a lot of flexibility.

a conventional loan might be a good fit for you if you:

  • Have good credit

  • Have steady, documented income

  • Want the option to drop mortgage insurance down the road

  • Are buying a second home or an investment property

  • Are buying a higher-priced home

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the conforming loan limit

Conventional loans: there’s a cap on how much you can borrow. This is called the Conforming Loan Limit.

Every year, a government agency called the FHFA looks at how much home prices went up and sets a new limit. The limit is also relative, so in counties with higher home prices, the limit is higher. 

And here’s something a lot of people miss: the limit is on the loan, not the price of the house. So you can buy a home that costs more than the limit, so long as your down payment covers the difference.

And if you need to borrow more than the limit? You’re not out of luck. There’s a different category of Conventional loan for that, called a Jumbo loan! We can help you with that too.

What about a Down Payment?

On Conventional loans, you make a down payment. A lot of people think you need 20% down to buy a home. You don’t. Depending on the program, some buyers (such as first-time homebuyers) may put down as little as 3%.

If you put down less than 20%, you’ll usually pay mortgage insurance. This is called PMI, or private mortgage insurance. It gets added to your monthly payment and protects the lender in case you can’t make your payments.

But here’s the good news about PMI: unlike some other loan types, PMI on a Conventional loan doesn’t last forever. Once you’ve built up enough equity in your home, you can ask to have it removed. And it will eventually drop off on its own. That means your monthly payment could go down over time.

With a Conventional Loan, you can decide what’s best for you!

30 Year Term

  • Lower Monthly Payment

  • Pay More Interest Overall

  • 30 Years to Pay off The Home

You choose your loan term:

15 Year Term

  • Higher Monthly Payment

  • Pay Less Interest Overall

  • 15 Years to Pay off The Home

You choose your rate type:

Fixed Rate

A fixed rate stays the same for the life of the loan.

Adjustable Rate (ARM)

An adjustable rate starts out fixed for a set number of years, then can change.

… and the flexibility continues! Conventional loans aren’t only for your primary residence!

You can also use a Conventional loan for a second home, like a vacation home, or an investment property you plan to rent out.

Conventional loans are popular for a reason. They’re flexible and there’s likely an option that fits your goals. Want to find out if a Conventional mortgage is right for you?

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