Think a 20% down payment is required to own a house? Discover how you can buy your dream home with a conventional loan for as little as 3% down.
Debunking myths about conventional loans.
Many people have misconceptions about how to qualify for a conventional loan. Let’s clear up the confusion.
Here are the real requirements for a conventional loan with Directions Home Loan:
- Down payments as low as 3%: Keep more of your savings for moving, furniture, and daily life essentials. A 20% down payment is a myth, not a requirement for most conventional mortgage loans. We help you find the minimum down payment that works for you.
- Credit scores from 620: You don’t need a perfect credit score of 850 to qualify for a great rate. We work with a wide range of financial profiles, and we understand that your credit history is more than just a number. Our minimum credit score requirements are accessible.
- No Private Mortgage Insurance (PMI): With a 20% down payment, you can avoid Private Mortgage Insurance from the start. This can significantly reduce your monthly mortgage payment. We can even show you how to remove your PMI later if you start with less!
- Flexible loan terms: The Department of Veterans Affairs limits the closing costs lenders can charge, protecting you from excessive fees.
Choose a plan that fits your budget with 15-, 20-, or 30-year fixed-rate options for predictable monthly payments. We also offer adjustable rate loans and adjustable rate mortgages for those seeking different payment structures.
Understanding conventional loans.
A conventional loan is the most common type of mortgage loan. It offers great flexibility, competitive interest rates, and a variety of down payment options for qualified borrowers. Unlike government-backed loans such as Federal Housing Administration (FHA) loans or Veterans Affairs (VA) loans, conventional loans typically require a strong credit report.
Is a conventional loan right for you?
- A borrower with a solid credit history (we start at 620)
- A homebuyer with at least 3% for a down payment
- Looking for flexible terms, such as a 15- or 30-year fixed-rate loan
- Someone who wants to avoid the upfront mortgage insurance premiums required by some government loans
| Feature | Conventional Loan from Directions Home Loan | FHA Loan |
|---|---|---|
| Minimum Down Payment | As low as 3% | As low as 3.5% |
| Minimum Credit Score | Typically 620+ | Typically 580+ |
| Mortgage Insurance | Private Mortgage Insurance can be canceled if down payment is less than 20% | Mortgage Insurance Premium (MIP) for the life of the loan |
| Property Types | Primary Residence, Second Home, Investment | Primary Residence Only |
Expert Note: We offer conforming conventional loans up to the 2025 limit of $806,500, as well as Jumbo loan options for higher-value homes. These conforming loans adhere to the maximum loan amounts set by Fannie Mae and Freddie Mac, the government-sponsored enterprises overseen by the Federal Housing Finance Agency. We also provide portfolio loans and non-conforming loans for unique situations.
The Directions Home Loan blog
Stay informed with our expert articles and guides on conventional loans, the mortgage market, and home management. Our blog is designed to provide valuable information to help you make the best decisions on your path to homeownership.
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Frequently Asked Questions
How much do I actually need for a down payment on a conventional loan?
You can get a conventional loan with as little as 3% down for amortized conventional loans. The old rule of thumb that you need 20% is a myth. While a 20% down payment helps you avoid Private Mortgage Insurance (PMI), it’s not a requirement to qualify.
What is Private Mortgage Insurance (PMI), and how can I avoid it?
Private Mortgage Insurance is a type of insurance that protects the lender if you stop making payments on your loan. It’s typically required on conventional loans when your down payment is less than 20%. You can avoid it by putting 20% down, or we can help you set up a plan to have it removed once you reach 20% equity in your home. This way, you don’t have to pay Private Mortgage Insurance indefinitely.
Can I get a conventional loan if I'm self-employed or have a nontraditional income?
Absolutely. We specialize in working with self-employed borrowers and those with nontraditional income streams. Unlike automated systems that struggle with complex financials, our expert loan officers take the time to understand your unique situation and find a solution that works. We can help you navigate conventional loan requirements, even if your situation is unconventional.
How long does the conventional loan process typically take with Directions Home Loan?
While every loan is unique, we are committed to an efficient and timely process. We combine smart technology with responsive communication to keep things moving, ensuring we meet the deadlines in your purchase contract for an on-time closing. Our timeline is often faster than those of some government agencies.
What documents will I need to get started?
To give you an accurate quote and pre-approval, it helps to have some basic documents ready, such as your most recent pay stubs, W-2s or tax returns from the last two years, and recent bank statements. Don’t worry, your dedicated loan officer will walk you through exactly what’s needed. We’ll help you understand the difference between conventional loans and other mortgage loans such as USDA loans.
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Let’s get started on your application
You’re closer than ever to owning your new home. Begin our simple, secure application today, and a dedicated loan expert will be in touch to guide you the rest of the way.
