Conventional Loans

June 10, 2025

What Is a Conventional Loan?

A conventional loan is a mortgage that’s not backed by a government agency like the FHA or VA. These loans are offered by private lenders such as banks, credit unions, and mortgage companies, and they’re ideal for buyers with strong credit and stable income.

Key Features

  • Down Payment: Typically 3%–20%, depending on the loan and your credit profile.
  • Credit Score: Minimum of 620, but the best rates go to those with scores 740+.
  • Private Mortgage Insurance (PMI): Required if you put down less than 20%, but it can be removed once you reach 20% equity.
  • Loan Limits: Conforming conventional loans follow Fannie Mae and Freddie Mac limits (as of 2025, around $766,550 in most areas, higher in high-cost markets).


Pros of a Conventional Loan

  • Lower overall borrowing costs for well-qualified buyers
  • Flexible loan terms (15-, 20-, and 30-year options)
  • Can be used for primary, second homes, or investment properties
  • PMI can be removed—unlike FHA loans, where it stays for the life of the loan


Cons

  • Stricter credit and income requirements
  • Higher down payments compared to some government-backed options
  • Not ideal for buyers with recent credit issues or limited savings


Is a Conventional Loan Right for You?

A conventional loan may be a great fit if you have good credit, stable income, and at least a modest down payment. It offers flexibility and long-term savings—but qualifying can be more demanding.


Big Seth’s Advice

As your trusted local expert, Big Seth works with trusted lenders across Northern Colorado to help you compare loan types and find the best fit for your situation. Whether you're buying your first home or moving up, he’ll break down the numbers in plain language so you can feel confident in your financing decision.

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