Conventional Loans in California

You want a normal mortgage on a normal house, and you want to know what that actually means before you sign anything. A conventional loan is a home loan that follows the rules written by Fannie Mae or Freddie Mac, the two companies that buy most mortgages from lenders. It has no government backing, which is what separates it from an FHA loan or a VA loan. Advanced Funding Solutions is a mortgage brokerage, so we arrange the loan and a wholesale lender funds it.

How the County Loan Limit Works

Your loan size decides which kind of mortgage you are in, and most buyers never hear about it until it matters. Each year the Federal Housing Finance Agency sets a maximum loan amount for every county, called the conforming limit. Stay at or under it and a conventional loan is on the table. Go over it and you are in jumbo loan territory, with a bigger down payment and stricter rules. Tell us your county and your price, and we will check the current limit for you.

What You Need to Qualify

You have to prove your income on paper, and that is where most buyers get stuck. A conventional lender reads your W-2s and pay stubs, or two years of tax returns if you are self employed. They also check your credit score, your savings, and your DTI. That is short for debt to income ratio, the share of your monthly income already going to debt payments. The minimum score and down payment come from the lender you pick, which is why we compare more than one.

How Mortgage Insurance Works and How It Ends

If you put down less than 20 percent, you will usually pay private mortgage insurance, or PMI. It protects the lender, not you, and it gets added to your monthly payment. The good news is that it does not last forever. Once you build enough equity, federal law under the Homeowners Protection Act lets you drop it, and your payment goes down.

Conventional Loan vs an FHA Loan

If your credit is still recovering, you are probably weighing a conventional loan against an FHA loan. The real trade is mortgage insurance. Most FHA loans keep their insurance for the life of the loan unless you refinance out, while conventional insurance comes off once you have enough equity. FHA rules, which HUD sets, can accept lower credit scores than many conventional lenders will. We can price both and put the monthly payments side by side.

Lower Down Payment Options

Saving a big down payment in California is hard, and some buyers do not need one. Fannie Mae's HomeReady and Freddie Mac's Home Possible are conventional loans built for smaller down payments. Both carry income limits set by the agency, so not every buyer can use them. Give us your income and county and we will check whether either one fits you.

When a Conventional Loan Is the Wrong Answer

You may be better off with a different loan, and it is better to hear that now than after an application. If you are self employed and your tax returns show less than you really earn, a bank statement loan may qualify you for more. If you are buying a rental and your own income will not carry the payment, a DSCR loan qualifies you on the rent instead. Both usually cost more, so if you qualify conventionally, take the conventional loan.

Already own a home and want a better rate or a shorter term? A refinance into a new conventional loan is often the next step. Not sure which road fits you? Tell us what you are buying and we will point you at the right loan before you apply.

Run your numbers with our conventional mortgage calculator, then talk to Advanced Funding Solutions about what you actually qualify for.