All Coast Lending: Mortgage Company | Brokers & Lenders

Conventional loans

If you have good credit and a stable income, chances are your lender will first see if you qualify for a conventional loan. Considered a basic mortgage loan, a conventional loan simply refers to a mortgage that comes from a private lender like a bank and isn’t backed or insured by a government program. Conventional loans can be “conforming,” the most common loan type, or “nonconforming.”

The difference mostly comes down to the size of the mortgage you’re trying to get. Conforming loans have maximum amounts set by the government — $647,200 in most counties (in 2022) — and are designed to be sold to Fannie Mae and Freddie Mac. These government-sponsored entities set other rules and guidelines for the mortgages, including a minimum credit score of 640 in most cases and a minimum down payment of 3% for some qualified borrowers.

Nonconforming loans include jumbo mortgages (which we’ll discuss later), as well as loans that don’t fall into another mortgage category. These can be designed for people with poor credit or wealthy individuals with unusual financial circumstances.

 

Best for

Conventional loans are best for people with good credit who are looking for what are typically the lowest interest rates and a less complicated application process. These loans tend to cost less than most other types of home loans, like Federal Housing Administration loans — so long as you qualify.

 

Things to watch out for

If you have less-than-stellar credit, you might have trouble qualifying for a conventional loan. Also be aware that if you put down less than 20%, you’ll usually need to buy private mortgage insurance, which will add to your total loan cost.