Conventional Home Loans

The main difference between a conventional loan and other types of mortgages is the fact a conventional loan is not made by a government entity nor insured by a government entity.

Two important factors are the term of the loan and the loan-to-value ratio:

  • 95% LTV with a 30-year term
  • 90% LTV with a 30-year term
  • 85% LTV with a 30-year term
  • 80% LTV with a 30-year term

The LTV can be lower than 80%. It can be whatever is comfortable for a borrower. If the LTV is higher than 80%, lenders require that borrowers pay for private mortgage insurance to protect against default. The term of the loan can be longer or shorter, depending on the borrower’s qualifications.  The advantage to conventional loans when compared to FHA or USDA is that mortgage insurance automatically cancels when the LTV reaches 78%, whereas FHA and USDA mortgages require mortgage insurance for the entire term of the loan.

Conventional Conforming loan limits are $417,000. A minimum FICO score for a good interest rate is higher than those required for an FHA loan. Loan limits above $417,000 are considered jumbo loans and the interest rates are slightly higher.