Conventional Purchase

The flexibility and low rates offered by conventional mortgages make them a great choice for many homebuyers. If you have a minimum credit score of 620, a down payment of at least 3%, and a debt-to-income (DTI) ratio of 45% or less, then you may qualify for a conventional home loan. Contact a Pennymac Loan Officer today to get a conventional loan today.

An FHA loan is guaranteed by the Federal Housing Administration. This partnership shares the risk of the loan between the lender and the U.S. government. Because of this, lenders can offer FHA loans to buyers who might not qualify for a conventional loan. In addition to different qualifications, FHA loans also come with required mortgage insurance.

A conventional mortgage is a home loan that meets Fannie Mae and Freddie Mac guidelines and isn’t insured by the government. To apply for a conventional mortgage, start by choosing a lender and completing a mortgage application. You will also supply the lender with any documents needed to verify your background, credit and other financial history and current credit score. After the application stage, your loan will go through underwriting. If approved, you’ll move on to closing, where you sign final documents and officially take ownership of the home. From there, you’ll begin making regular monthly payments over the life of the loan.

If you make your regular monthly payments, your conventional mortgage will be paid off when the term of your loan is up, whether it is 15, 20, or 30 years. However, paying extra toward your mortgage can allow you to pay it off earlier, and potentially saving thousands in interest long-term.

One of the guidelines that conventional loans must adhere to is a loan amount limit. These limits are provided to Fannie Mae and Freddie Mac by the Federal Housing Finance Agency (FHFA). For most of the U.S., the 2026 maximum conforming loan limit is $832,750. In areas with high housing costs, the limit can be as high as $1,249,125.

With low rates, flexibility, and no mortgage insurance when you put at least 20% down, the benefits of a conventional mortgage make it a great choice for many homebuyers. Additionally, since the loan’s rate is fixed, you know exactly what your loan payment will be throughout the life of your mortgage. Your loan payment, itself, will not change unless you choose to refinance. However, your escrow (typically included in the monthly payment total) can fluctuate slightly from year to year because of taxes and homeowner’s insurance, factors outside of your lender’s control. A fixed rate loan allows homeowners to budget and plan for the future with little to no increases in their payment amount.

Your interest rate is the cost of borrowing the loan amount — it affects your monthly payment. But it's not the only cost you’ll pay. The APR (annual percentage rate) includes the interest rate plus other expenses like lender fees, closing costs and any discount points. APR gives you a better sense of the loan’s true cost over time by spreading those additional charges across the life of the loan.

A fixed-rate conventional loan has the same interest rate and monthly payment for the life of the loan. Adjustable-rate conventional loans, also called adjustable-rate mortgages (ARMs), start with a lower fixed interest rate for a set period (such as 5 or 7 years), then adjust based on market conditions. This means payments may rise or fall. Fixed-rate loans suit buyers staying long-term, while ARMs can benefit those planning to move or refinance before the rate adjusts.