Conventional Loans in California
Are you looking for conventional mortgages with favorable terms and conditions? Standard Lenders offers many types of conventional loans to satisfy different circumstances. Let us help you find the best loan option that is ideal for your needs.Get Started
What is a conventional mortgage?
A conventional mortgage is a home loan solution that is not guaranteed by the federal government. As a result, these loans have stricter qualification requirements than government-backed loans like VA or FHA loans. You can get conventional loans through private lenders like banks and mortgage companies.
Despite being harder to qualify for, conventional mortgages are the most common type of home loan offered by lenders. For those that qualify, these mortgages can offer many benefits over other types of home loans. Conventional mortgages are ideal for borrowers with a strong credit score and the ability to pay a larger down payment for the property.
Types of Conventional Loans
In general, there are two types of conventional loans in California: conforming and non-conforming loans.
1. Conforming loans
Most conventional mortgages are conforming, which means they comply with the terms and conditions of Fannie Mae and Freddie Mac. The most important of these conditions is the maximum loan amount set by the government, which is $548,250 in 2021 for most of the US. Fannie Mae and Freddie Mac buy conforming loans from lenders and sell them to investors.
2. Non-conforming loans
Non-conforming loans ⏤ also known as jumbo loans ⏤ are mortgages that exceed the funding limit set by the government. A $1-2 million mortgage in 2021 would be considered a non-conforming loan. Jumbo conventional loans are less standardized, so qualification largely depends on lender requirements. It’s important to shop around so you can find the best deal.
The Requirements of a Conventional Mortgage
Since conventional mortgages are not backed by the federal government, lenders take on more risk by giving out unsecured loans. For this reason, banks and creditors are more cautious about who they’ll lend money to. Here are some typical requirements to qualify for conventional loans in California:
- A minimum credit score of 620
- A 50% or less debt-to-income (DTI) ratio
- At least a 3% down payment for first-time homebuyers
- A minimum down payment of 10% to buy a second home
- If the home is not a single-family home, you should pay a 15% down payment
- For jumbo loans, the down payment ranges from 20%-40%
- If you pay less than a 20% down payment, you are required to pay private mortgage insurance (PMI) every month
Get the Best Mortgage for You With Standard Lenders
Finding the right conventional loan product can be frustrating. But Standard Lenders has got your back to ensure the entire process is as seamless as possible. Whether you’re a first-time homebuyer or looking to refinance your home, we’ll leverage our industry expertise and extensive connections to develop a mortgage plan that is perfectly tailored to your needs.
Our counselors can connect with you over the phone, internet, and within the comfort of your home to educate you about different loan options. Once you select a loan product, we’ll handle all the application and documentation procedures to help you close the loan with the least hassle. Contact the best conventional loan lender in California to find your perfect mortgage.
Common Questions About Conventional Loans
What are the benefits of conventional mortgages?
Although they're tougher to get, conventional mortgages offer many advantages over other loan types. Since they don’t have to stick to government-prescribed programs, private lenders can offer more flexible down payment options and term lengths. Conventional mortgages also allow you to buy diverse types of real estate such as second homes and investment properties.
What disqualifies a conventional loan?
Conventional mortgages are not for everyone. If you suffered bankruptcy or foreclosure within the past seven years, have more debt than normal, or have a DTI above 43%, then you will have trouble qualifying for conventional mortgages.
What is the 2022 loan limit for conventional mortgages?
The Federal Housing Finance Agency (FHFA) has increased its conforming loan limits for 2022. The 2022 limit is $625,000 for single-family homes in most of the US.
Do I need mortgage insurance with a conventional loan in California?
If you pay less than a 20% down payment on the property, then you are required to pay private mortgage insurance every month. However, unlike FHA loans, you don’t have to pay mortgage insurance for the life of the loan. If the principal loan amount drops to 78% of the home’s value, you can cancel the mortgage insurance.