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Conventional mortgages come in two primary structures. Fixed-rate loans lock your interest rate for the entire repayment term, giving you predictable monthly payments over 15, 20, or 30 years. Adjustable-rate mortgages (ARMs) offer a lower introductory rate for a set period, typically 5 or 7 years, before adjusting annually based on a market index.
Because no government backing exists, lenders carry more risk on conventional loans. As a result, qualification standards are somewhat stricter than government-backed programs. However, borrowers who meet these standards benefit from lower total loan costs, no upfront mortgage insurance premiums, and the ability to cancel PMI once they reach 20% equity.
A minimum FICO score of 620 is required for most conventional programs. Borrowers above 740 typically receive the best available interest rates and lowest PMI premiums.
Minimum 3% for first-time buyers through Fannie Mae HomeReady or Freddie Mac Home Possible programs. A 20% down payment eliminates the need for private mortgage insurance entirely.
Lenders generally cap DTI at 45%, though some allow up to 50% with strong compensating factors such as high reserves or excellent credit.
Two years of W-2s or tax returns, recent pay stubs covering 30 days, and employment verification are standard. Self-employed borrowers need two years of filed tax returns plus a year-to-date profit and loss statement.
An independent licensed appraiser must confirm the property value meets or exceeds the loan amount. The home must meet minimum habitability and safety standards.
Depending on the loan amount and property type, lenders may require liquid assets equal to two to six months of mortgage payments after closing.
Submit income documentation, authorize a credit pull, and receive a pre-approval letter that shows sellers you are a qualified buyer with verified financing capacity.
Choose between fixed-rate stability or adjustable-rate savings. Your PierPoint loan officer will compare rate sheets and help you select the term that matches your financial goals.
Complete the Uniform Residential Loan Application (Form 1003) along with all supporting documents including bank statements, tax returns, and identification.
The lender’s underwriting team reviews every detail of your application while an independent appraiser confirms the property’s market value.
If the underwriter needs additional documentation, such as an updated bank statement or a letter of explanation, you will receive a conditions list to satisfy.
Once all conditions are met, your loan receives final approval. Review the closing disclosure, sign the documents at the title company, fund the loan, and receive your keys.
Unlike FHA loans that charge a 1.75% upfront MIP at closing, conventional loans have no equivalent upfront insurance fee, reducing your cash needed at the closing table.
Private mortgage insurance is automatically removed when your loan balance reaches 78% of the original appraised value, or you can request removal at 80% through a new appraisal.
Conventional financing works for primary residences, second homes, vacation properties, and investment properties up to four units, all under one loan program.
Borrowers with credit scores above 720 and down payments of 20% or more consistently receive the lowest available mortgage rates in the market.
For 2024, conforming loan limits reach $766,550 in most areas and up to $1,149,825 in designated high-cost counties, covering the majority of home purchases.
Conventional mortgages are designed for borrowers who have established credit histories, stable employment, and enough savings for at least a modest down payment. If your credit score is 620 or higher and you can document consistent income, this loan type should be at the top of your list.
First-time homebuyers benefit from low-down-payment conventional options like Fannie Mae HomeReady, which requires just 3% down and allows income from non-occupant co-borrowers. Move-up buyers and those purchasing second homes or investment properties also find conventional loans advantageous because government-backed programs like FHA and VA restrict these property types.
If you plan to stay in your home long-term and want predictable monthly payments, a 30-year fixed conventional loan offers the stability of a locked rate for three decades. If you expect to sell or refinance within 5 to 7 years, an ARM can save thousands in interest during the initial fixed period.
Most conventional lenders require a minimum FICO score of 620. However, to qualify for the best interest rates and lowest PMI premiums, a score of 740 or above is recommended. Your PierPoint loan officer can review your credit profile and identify steps to improve your score before you apply.
The minimum down payment is 3% for qualified first-time buyers through programs like Fannie Mae HomeReady. For repeat buyers, most lenders require at least 5%. Putting 20% down eliminates private mortgage insurance and often secures the lowest available rate.
Yes. Conventional mortgages are one of the few loan types that finance investment properties with up to four units. Expect to put at least 15% down for a single-unit investment and 25% for two to four units, with slightly higher interest rates than primary residence financing.
You can request PMI cancellation once your loan balance reaches 80% of the original appraised value, provided you have a good payment history. PMI is automatically terminated when the balance drops to 78% of the original value.
Conforming loans fall within Fannie Mae and Freddie Mac loan limits and meet their underwriting guidelines. Non-conforming loans, including jumbo mortgages, exceed those limits or have other characteristics that prevent them from being sold to the agencies.
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Speak with an experienced PierPoint Mortgage loan officer today. We will help you find the right loan for your goals and guide you through every step of the process. Call (231) 737-9911 for a free consultation.
NMLS #112844 · Equal Housing Opportunity · No credit pull required to start
NMLS #112844
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Disclosure: By refinancing your existing loan, your total finance charges may be higher over the life of the loan. PierPoint Mortgage, LLC • NMLS ID #112844 • nmlsconsumeraccess.org
3088 Sheffield St. STE BMuskegon, MI 49441
(231) 737-9911
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