A conventional loan is a type of mortgage loan that’s not backed by a government agency. There are two kinds: conforming and non-conforming.

Conventional loans also have a low down payment requirement, some going as low as 3 percent, while some lenders offer up to 100 percent financing. They typically run for 30 years but can have terms within 15–20 years. The main difference between conventional and other loans is that they do not have the perks of government-issued loans.

Is a Conventional Loan Good?

Depending on your financial situation, conventional loans can be someone’s advantage. As it doesn’t require high income and high credit scores, they are easier to apply for. Unlike government-backed loans, they don’t have geographic limitations or special requirements. 

During difficult times, a conventional loan is more flexible than a government loan, which may have complex qualifications.

Interest rates are also lower in conventional loans and can be fixed or adjustable. A fixed interest rate is suggested to lock in the current interest rate for those who will pay it over the years. 

Meanwhile, if you plan to extend your loan, an adjustable interest rate should be a great option. The only downside is that it is more challenging to apply because of the pandemic. Even if you qualify, you’ll likely be offered a higher interest rate.

Conforming vs. Non-Conforming

Conforming loans adhere to the standards set by Fannie Mae and Freddie Mac, including maximum loan amounts. The standard limit for conforming conventional mortgage in 2019 is $484,350 for a single-family home. Meanwhile, for borrowers living in high-cost areas, the limit can go as high as $726,525.

Non-conforming loans, also known as jumbo loans, allow borrowers to extend their lending limits for conforming loans. However, they require higher credit scores compared to conforming loans—around 700 or higher. It also requires a lower debt to income ratio and higher down payment. But even if it needs more, it pays more and grants a bigger loan.


In choosing between conforming and non-conforming loans, think of the things you’d like to accomplish with the money. How much do you need and what do you need it for? 

Next, consider your qualifications. Although conventional loans require less to qualify, each type still requires proof of eligibility for quick loan approval. Do you have a high credit score? Do you have a high income-to-debt ratio? All these questions should have an answer if you need to take a conforming or non-conforming loan.

Both conventional loan types are great, especially for borrowers who need financial stability. However, try to consider your position financially before signing the deal. Make sure that you are not burying yourself in debt that you can’t recover from.

Cal Coast Funding is a premier mortgage lender based in San Diego, California. We take pride in offering competitive rates and outstanding service. Our goal is to make the loan process simple, straightforward, and fast for all borrowers. Regardless of the reason, leave it to us, and we’ll assist you all the way. Check out our conventional loan program and apply today!