Conventional Loans in California: A Homebuyer Guide
Quick answer: A conventional loan is a mortgage that is not insured by a government agency. Eligible California buyers may qualify with as little as 3% down, while larger down payments can reduce the payment and mortgage-insurance cost.
Why Buyers Choose Conventional Financing
Conventional mortgages are widely used for primary residences, second homes, and eligible investment properties. They can offer flexible terms, multiple down-payment choices, and the ability to remove private mortgage insurance when applicable requirements are met.
Guidelines and pricing depend on occupancy, loan amount, property type, credit, income, assets, and other factors.
Conventional Loan Down Payments
Some eligible primary-residence programs allow 3% down. Other transactions may require 5%, 10%, 20%, or more depending on the borrower, property, occupancy, and number of units.
A 20% down payment is not always required. However, putting less than 20% down will commonly require private mortgage insurance.
Private Mortgage Insurance
Private mortgage insurance, or PMI, protects the lender when the down payment is smaller. The monthly cost varies with the loan-to-value ratio, credit profile, coverage, and insurer.
Unlike FHA mortgage insurance, conventional PMI may be canceled when federal law and loan-servicer requirements are met. Ask how the cost and removal rules apply to the specific loan.
Conforming vs. Nonconforming Loans
Conforming loans meet Fannie Mae or Freddie Mac standards, including the applicable county loan limit. A conventional loan above that limit is typically considered jumbo financing and uses lender-specific guidelines.
What Conventional Lenders Review
- Income and employment or business stability
- Credit history and monthly debts
- Down payment, closing funds, and reserves
- Occupancy and property type
- Appraisal and title information
Preapproval reviews the full financial picture rather than relying on one score or ratio.
Conventional vs. FHA Loans
FHA financing may offer a different underwriting and down-payment structure. Conventional financing may offer more PMI flexibility and can be used for additional occupancy types.
Compare rate, APR, mortgage insurance, total payment, cash to close, and expected time in the home.
Conventional Loan FAQs
Do I need 20% down? No. Some eligible primary-residence programs allow as little as 3% down, although mortgage insurance and qualification requirements apply.
Can gift funds be used? Eligible gift funds may be allowed for certain transactions. Occupancy, property type, donor, and documentation requirements apply.
Can I buy an investment property? Yes. Conventional financing may be available for eligible investment properties, usually with different down-payment, reserve, and pricing requirements.
How do I compare conventional offers? Review the interest rate, APR, points, lender fees, PMI, payment, cash to close, and loan structure—not only the advertised rate.
Start with the Mortgage Preapproval page, estimate your payment using the home purchase calculator, or schedule a free consultation.
