Conventional Mortgages

When most people think about getting a mortgage, they are often talking about a conventional loan without even realizing it. Conventional loans are the most common type of mortgage in the United States, making up more than half of all mortgages issued. Unlike government-backed loans such as FHA, VA, or USDA loans, conventional loans are not insured by a government agency. Instead, they are backed by private lenders and typically conform to standards set by Fannie Mae and Freddie Mac.

For buyers and refinancers who have solid credit, steady income, and manageable debt levels, a conventional loan often offers flexible terms and competitive interest rates. At CapCenter, we help our clients navigate these options with confidence—and because we offer Zero Closing Cost mortgages, we make conventional loans even more affordable.

What Makes a Loan “Conventional”?

A mortgage is considered “conventional” if it is not guaranteed by a government program. Within that broad definition, conventional loans break down into two main categories: conforming and non-conforming.

• Conforming loans meet the requirements set by Fannie Mae and Freddie Mac, including loan limits, credit scores, debt-to-income ratios, and documentation standards. These loans are generally easier to qualify for and may offer lower rates.
• Non-conforming loans do not meet Fannie or Freddie’s requirements. The most common type of non-conforming loan is a jumbo loan, which exceeds conforming loan limits.

Both types can still be considered conventional loans—they’re simply structured differently depending on the borrower’s needs.

Benefits of a Conventional Loan

Conventional mortgages come with several advantages that make them attractive to many homebuyers:

1. Flexibility in Property Type – Conventional loans can be used to purchase primary residences, second homes, and even investment properties, giving borrowers more options compared to government programs.
2. Lower Overall Costs – Borrowers with strong credit often qualify for better rates and lower mortgage insurance costs compared to FHA loans. With CapCenter’s Zero Closing Costs, this advantage is even stronger.
3. Wide Range of Term Options – Conventional loans aren’t just the traditional 30-year fixed. Borrowers can select from 10-, 15-, 20-, or 30-year terms, and can choose adjustable-rate mortgages (ARMs) if they prefer.
4. No Upfront Mortgage Insurance Premium – Unlike FHA loans, conventional loans don’t require an upfront mortgage insurance payment, which can save thousands at closing.

The Role of Private Mortgage Insurance (PMI)

One of the biggest factors to understand with conventional loans is private mortgage insurance (PMI).

If you put down less than 20%, PMI will likely be required. PMI protects the lender in case of default, but it doesn’t have to last forever. Once you’ve built up 20% equity in your home, you can request to have PMI removed. This is a significant difference from FHA loans, where mortgage insurance may remain in place for the life of the loan.

At CapCenter, our loan officers help clients understand how PMI impacts their monthly payments and how to strategically plan for its removal. For many buyers, starting with a smaller down payment makes homeownership possible sooner, and PMI is simply a temporary stepping stone.

Conventional Loan Requirements

While every borrower’s situation is unique, conventional loans usually require:

• Credit Score: Generally a minimum of 620, but higher scores unlock better rates.
• Down Payment: As low as 3% for first-time buyers, though 5–20% is more common.
• Debt-to-Income Ratio (DTI): Typically 45% or less, though strong compensating factors may allow for higher.
• Income Verification: Steady, documented income is required, usually through W-2s, pay stubs, and tax returns.
• Property Standards: The home must meet certain appraisal and condition requirements, though they are usually more flexible than government-backed loan standards.

Because every lender interprets these guidelines slightly differently, working with a knowledgeable mortgage partner like CapCenter ensures you get accurate guidance without surprises.

Conventional Loans vs. Government-Backed Loans

Many buyers want to know: is a conventional loan better than FHA, VA, or USDA loans? The answer depends on your financial profile and goals.

• FHA Loans are often best for borrowers with lower credit or smaller down payments, but they require mortgage insurance for the life of the loan.
• VA Loans are ideal for eligible veterans and service members, offering no down payment and no PMI.
• USDA Loans are designed for buyers in eligible rural areas and also allow for no down payment.

For buyers with solid credit and a steady income, conventional loans often come out ahead because of lower long-term costs and more flexibility in property type.

Refinancing with a Conventional Loan

Conventional loans aren’t just for purchases—they’re also a strong option for refinancing. Whether you’re looking to lower your interest rate, shorten your loan term, or access equity through a cash-out refinance, conventional programs offer flexible solutions.

CapCenter makes refinancing even more cost-effective by eliminating closing costs. With no thousands of dollars in fees to weigh against your potential savings, the decision to refinance becomes much clearer. You can explore your refinance options with our Mortgage Calculator and see how a new rate could impact your monthly payment.

CapCenter Advantage: Zero Closing Costs

Closing costs are one of the biggest pain points in the mortgage process, adding thousands of dollars to what buyers and refinancers must bring to the table. That’s where CapCenter is different.

With our Zero Closing Cost Mortgage, we cover the costs typically charged by lenders, such as origination fees, underwriting, processing, and even attorney services. This means you can put more money toward your down payment, keep more equity in your home, or simply save thousands of dollars compared to working with a traditional lender.

Whether you’re buying your first home, upgrading to a bigger property, or refinancing to improve your monthly budget, CapCenter’s unique approach makes conventional loans more affordable than ever.

Is a Conventional Loan Right for You?

Choosing the right mortgage comes down to balancing your credit profile, financial goals, and homeownership plans. Conventional loans are often the best fit if you:

• Have a good credit score and stable income.
• Want flexibility in property type or location.
• Prefer lower long-term mortgage insurance costs.
• Plan to stay in your home long enough to build equity.

If that sounds like you, a conventional loan may offer the balance of affordability and flexibility you’re looking for. And with CapCenter, you can explore your options without worrying about closing costs eating into your savings.

Final Thoughts

Conventional loans remain the most popular mortgage choice for a reason: they provide competitive rates, flexible options, and long-term affordability—especially when paired with a trusted partner who makes the process simple and cost-effective.

At CapCenter, our mission is to make homeownership more accessible and affordable. Whether you’re a first-time buyer or a seasoned homeowner considering a refinance, our team is here to guide you every step of the way. Explore our tools, connect with our experts, and see how a Zero Closing Cost conventional loan can help you achieve your goals.

‍