Conventional Loans
What is Conventional Loans?
Conventional Loans are the most common and widely recognized type of mortgage. They serve as a standard choice for many individuals embarking on their mortgage journey. With a minimum down payment requirement of 5% (3% for first-time homebuyers), these loans offer a maximum loan amount of $1,089,300 in Hawaii in 2023. Seller concessions can reach up to 2-9% of the sales price, providing additional flexibility in the home-buying process. Private Mortgage Insurance (PMI) is necessary when the Loan-to-Value (LTV) ratio exceeds 80%, meaning when the mortgage amount surpasses 80% of the property's value. While this information may initially seem complex, the process itself is quite conventional and straightforward.
Who Is Eligible for Conventional Loans?
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A Conventional Loan will appeal to borrowers with a strong credit rating (at least 620 to qualify, with a score above 740 to help you get the best rate) and can put a down payment of 3% or more. They’re not backed by a government agency, and the loan limits are set by the FHFA (Federal Housing Finance Administration). The down payment and income requirements for a conventional loan are often set by the lender, and borrowers typically need to provide detailed of their income, employment history, and assets.
Features
Fewer Fees
Unlike other loans, such as FHA Loans, Conventional Loans don’t have program-specific fees.
More lending options
Conventional Loans have flexibility. You can start with a “30-year fixed, 15-year, 20-year” or even an adjustable rate.
More property types
You have more options for homes you’re looking at, such as a second home or property you’re looking at as an investment.
