Conventional Loans

What are Conventional Loans?

Traditional loan programs (fixed rate mortgages) that require at least 3% down and offer the lowest interest rates. Loans up to $453,100 are called “conforming” or “Fannie Mae” loans. Loan amounts between $453,100 and $679,650 are referred to as “high balance” or “jumbo conforming” loans. Loan limits are higher for 2, 3 and 4 unit properties. Mortgage insurance is required when the down payment is less than 20%. May be used for owner-occupied, second homes, and investment properties. 


Most Common Types of Conventional Loans

The most common conventional loans are fully-amortizing fixed rate loans and hybrid fixed/adjustable rate loans that start out fixed and then become adjustable for the remaining life of the loan.

Fixed rate mortgages: The rate and payment on a fixed rate mortgage never change. The most common fixed rate loan is 30-year fixed because it has the lowest payment. 15-year fixed loans are used by homeowners who want the lower rate of the 15-year loan and who want to save interest over the life of the loan; these two benefits are achieved because the monthly payment is typically about 30% higher than with a 30-year fixed loan.

There are other fixed mortgage terms, such as 25, 20 and 10 years. Since these are much less popular with consumers the rates do not tend to be an improvement over 15 and 30-year loans.

Fixed/adjustable hybrid loans: These loans come in 3/1, 5/1 7/1 and 10/1 varieties, meaning that the rate is fixed for 3, 5, 7, or 10 years and then adjusts annually for the remainder of the 30-year loan term. These are designed for consumers who believe they will move, refinance or pay off their loans within the fixed rate period, as the rate can move up substantially after the fixed rate period.


What are the Conventional Down Payment Requirements?

Conventional loans up to $679,650 generally require at least 5% down for owner-occupied residences and 20% for investment properties. For owner-occupied “jumbo” loan amounts over $679,650 the down payment requirement is at least 10% and many lenders require 20% down at this loan amount level. Jumbo investment property loans generally require at least 25% down.

Conforming/Fannie Mae loan limits for 2-4 unit properties in most Bay Area counties are as follows:

2 units                  $870,225

3 units                  $1,051,875

4 units                  $1,307,175


What types of property are eligible?



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Holmgren and Associates

DBA of Finance of America
1900 Mountain Boulevard
Oakland, California 94611
Phone: 510-339-2121
NMLS 0910184/1071


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