Conventional Home Loans

Conventional home loans stand as the most popular mortgage option for homebuyers in the United States. These loans, offered by private lenders without government backing, provide a pathway to homeownership for many Americans. Understanding the intricacies of conventional mortgages such as their requirements and loan limits is important for potential homeowners seeking to make informed decisions about their financing options.

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What Are Conventional Home Loans?

Conventional loans are mortgages that aren't guaranteed or insured by the federal government. Instead, they are available through and backed by private lenders, such as banks, credit unions, and online mortgage companies. These loans come in various forms such as fixed-rate and adjustable-rate options allowing borrowers to choose the best fit for their financial situation.

These loans are largely sought by:

Types of Conventional Loans

Interested in learning how a conventional loan can work for you? Contact us today to explore financing options tailored to your needs.

Requirements for Conventional Loan

Credit Scores

  • 620 and up credit scores
  • 720 and above get best terms
  • No major credit defaults in last 4 years
  • No 30-day housing lates in last 12 months
Income & Employment

  • 2 years verifiable recent employment
  • income verified by paystubs & tax returns
Down Payment & DTI

  • Minimum of 3% or 5%
  • 43-50 DTI and varies per lender
  • P.I.T.I reserves: 3-9 months

Property Type

  • Single family home, condo, townhome
  • Multi-unit properties (up to four units)
  • Condos (at least 51% owner-occupied units)

Note: These requirements apply to both purchase and most refinance transactions. A refinance with cash out is capped at 85 LTV and credit scores must be over 720. Guidelines above are subject to change.

Conventional Loan Limits for 2025


Conventional loan limits are adjusted annually based on changes in average home prices. For 2025, the conforming loan limits are as follows:

Property Type Standard Limit High-Cost Area Limit
1 Unit $806,500 $1,209,750
2 Units $1,032,650 $1,548,975
3 Units $1,248,150 $1,872,225
4 Units $1,551,250 $2,326,875

These limits apply to most areas of the United States with higher loan limits in designated high-cost regions in California, Hawaii, Washington, Colorado and Northeastern U.S. counties.

Pros and Cons of Conventional Loans vs. FHA

Advantages

Conventional mortgages offer several benefits to qualified borrowers:

  1. Flexibility in loan terms and options
  2. No upfront mortgage insurance premium
  3. Ability to cancel PMI once 20% equity is reached
  4. Higher loan limits compared to some government-backed loans
  5. Faster approval process & closings

Challenges

While conventional loans offer numerous advantages, they also present certain downsides:

  1. Stricter credit requirements compared to FHA loans
  2. Higher interest rates for borrowers with low credit scores
  3. PMI requirement for down payments less than 20%

The Future of Conventional Home Loans

Conventional loans remain a cornerstone of home financing with ongoing adjustments to loan limits and requirements to reflect changing market dynamics.

Prospective homebuyers should stay informed about these changes and work closely with trusted lenders to close on a home. Learning how they work helps borrowers to make sound financial decisions and achieve their homeownership goals.

Consulting with an experienced mortgage professional can provide valuable insight and guidance throughout the process. These experts can help you assess your financial situation, different loan options, and develop a strategy to close your loan. Take the first step towards homeownership today.

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Disclosure: Minimum loan amount is $200,000 for residential loans. Loan guidelines are subject to change per lender at any time until the loan is approved and the rate is locked. Borrowers must be approved by underwriting. Not all applicants will qualify.