When it comes to shopping for a new home, price is king. Unfortunately, overpriced homes are not too hard to find these days. At NHC, we’re on a mission to help everyone find a home they can truly afford. We offer newly constructed homes across multiple states—including Texas and Florida—that are priced at the lowest price per square foot on the market. On top of the price, though, there is another key factor that every prospective buyer should keep in mind: financing. With so many lending options to choose from, it’s important to find one that matches your financial goals.

The first route you could take is the conventional loan. But what is a conventional home loan? How does it differ from government-backed FHA loans? And what are the minimum requirements needed to apply? To keep it short and sweet, with the money you save on a newly constructed NHC home, you may be surprised that you could easily qualify for the minimum down payment for a conventional loan. So, let’s break it all down, shall we?

What is a Conventional Home Loan?

Unless you’re able to pay for your home entirely in cash, you’ll likely need a mortgage. So, what is a conventional home loan? A conventional home loan is a popular type of mortgage that is not insured or guaranteed by a government entity, like the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, these loans are offered by private lenders, such as banks, credit unions, or mortgage companies such as NHC Mortgage, our partner lender which helps homebuyers secure affordable rates on home loans.

Now that we know what a conventional home loan is, let’s briefly discuss why they’re a popular option among first-time home buyers. To start, conventional loans may be more flexible vs. FHA loans. Borrowers can choose from a variety of loan terms, typically ranging from 15 to 30 years, and can opt for either a fixed or adjustable interest rate, which can help you find an option that best suits your financial situation. Additionally, you may not need to pay for private mortgage insurance (PMI)—we’ll discuss this in more detail later in the blog.

NHC Makes Financing Easy

Once you find an affordable home that truly fits your budget (we’ve got tons of them), you’ll have access to a dedicated loan officer who will work closely with you to determine the best loan option, including conventional vs. FHA loan routes.

Learn More

What are the Requirements for Conventional Home Loans

We’ve answered what a conventional home loan is, so how do you qualify? Believe it or not, it’s not as hard as you might have heard. One of the biggest misconceptions is that you’ll need to save at least 20% for a down payment or have an excellent credit score, but depending on which lender you work with, neither of these is set in stone. Plus, with the amount of money you’ll save on an NHC home, you may be able to afford a 20% or HIGHER down payment to avoid paying PMI!

Credit Scores

We would be lying if we said your credit score wasn’t a major factor, but most lenders will offer conventional home loans to those with scores of around 620 and higher. Now, higher credit scores (think 700+) can likely help you secure better interest rates and terms. At NHC, we cover all closing costs associated with your new home, which could help you set aside more money for your down payment to lower your interest rate—even with a score of around 620.

Down Payments

We mentioned earlier that one of the biggest misconceptions surrounding what a conventional home loan is tends to be the down payment. You are not required to pay a 20% minimum down payment for a conventional loan. In fact, you could qualify with a down payment of as low as 3%. Compared to most homes on the market, however, NHC’s newly constructed homes are priced to put less stress on your wallet during closing.

You may need to pay for Private Mortgage Insurance (PMI) if your down payment is below 20%, but this varies by lender. Check out our mortgage calculator to get a better picture of what you may be paying.

Loan Limits

A common question when discussing what a conventional loan is centers around limits. Essentially, there are two types of conventional loans: conforming and non-conforming. Conforming loans meet the standards set by the Federal Housing Finance Agency (FHFA). In 2023, the loan limit for a single-family home was $726,200 ($1,089,300 in high-cost ZIP codes). Any loan above that amount would be considered non-conforming. You won’t need to worry about applying for a non-conforming loan when you purchase through NHC, though.

Putting Affordable Homes—and Lending—On the Map

At NHC, we’re here to give you the best bang for your buck when shopping for a new home. Our newly constructed communities across Texas, North Carolina, Alabama, and Florida are designed to blend low cost with high value, helping you find a space to fit your family AND your budget. Explore our current floor plans, where home prices start as low as the $100s! You can also contact us if you have any questions about our home-buying process, including conventional vs. FHA loans for your home.

FAQs

Can first-time home buyers get a conventional loan?
Yes! A common misconception about what conventional home loans are is that first-time buyers can’t qualify. As long as you meet the basic requirements, you can apply.

What is private mortgage insurance?
Private mortgage insurance (PMI) is a type of insurance that may be required by lenders when a borrower makes a down payment of less than 20% on a conventional loan. PMI protects the lender in case the borrower defaults on the loan, and it is added to the monthly mortgage payment.

What are the interest rates on conventional home loans?
The interest rates for conventional home loans tend to vary and are determined by several factors, including your down payment, credit score, and rates set by the federal government.

What credit score is needed for a conventional loan?
To qualify for a conventional home loan, a credit score of 620 or higher is typically required.

What is the minimum down payment for a conventional home loan without PMI?
To get a conventional loan without PMI, a down payment of 20% or higher is required.

Is 20% the minimum required down payment for a conventional loan?
No. Another misconception about what a conventional home loan is centers around the down payment. You could qualify for as little as 3%!

Is FHA PMI higher than conventional?
FHA mortgage insurance is usually higher vs. conventional loans. This is because lenders tend to take on borrowers with lower credit scores.