Conventional Loans

As the name would suggest, these loans are basically the bread and butter of the mortgage world. Conventional loans, sometimes referred to as agency loans, are mortgages offered through Fannie Mae or Freddie Mac, government-sponsored enterprises (GSEs) that provide funds for mortgages to lenders.

Conventional loans have a higher bar for approval than other types of loans do. They tend to be good for borrowers with good credit and a low debt-to-income (DTI) ratio who can make a down payment of 20%, as this allows them to avoid paying for private mortgage insurance (PMI).

However, conventional loans also allow down payments as low as 3%. With any down payment less than 20%, you’ll have to pay for PMI until you reach 20% equity in your home. There are also options for lender-paid mortgage insurance (LPMI), where you either make a one-time lump-sum payment at the start of your loan or take on a higher interest rate in exchange for the lender paying for your mortgage insurance.


  • Allows low down payments
  • No PMI with down payments of 20% or more
  • PMI can be removed once you reach 20% equity
  • Ability to get LPMI (like PMI Advantage)
  • Flexibility in terms – can select any repayment period between 8 and 30 years
  • Can be used to buy primary residences, vacation homes and investment properties


  • Harder to qualify for than other loan types
  • Paying for PMI with down payments lower than 20%

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