Conventional Loan

Conventional Loans are loans that are not federally insured and typically owned by Fannie Mae or Freddie Mac. Conventional Loans require a borrower to have at least a 20% equity position in the property. If a borrower has less than 20% equity/down payment then PMI (Private Mortgage Insurance) is required. The alternative to PMI is called LPMI (Lender Paid Mortgage Insurance) and that is when the lender pays the mortgage insurance on the behalf of the borrower in exchange for a slightly higher interest rate. The Maximum loan amount for Conventional loans is $417,000.

Interest rates for Conventional loans can vary from borrower to borrower depending on credit score and LTV ( loan to value). For borrowers with good credit and at least 20% invested into the property Conventional loan typically are the way to go but not always. Investors looking to finance non-owner occupied properties are generally limited to Conventional Loans.