Allen Markel, REALTOR® · Texas Premier Realty

Paying for It

Conventional Loans, Explained Plainly

The most common home loan in the country, and the one every other program gets compared to. It is not government-backed, and that shapes everything about how it treats you.

Browse homes for sale

Is this right for you?

The honest fit

Best for

  • Buyers with a solid credit history and steady, easy-to-document income
  • Anyone who wants their mortgage insurance to eventually go away instead of following the loan for life
  • Buyers putting down more than the minimum, where conventional pricing tends to reward you
  • Purchases that aren't a primary residence — second homes and rentals generally can't use FHA, VA, or USDA

Maybe not if…

  • Your credit file is thin or damaged — FHA was built for exactly that and often costs less in that case
  • You're eligible for VA or USDA, both of which can require nothing down
  • Your loan amount would land above the annual conforming limit, which puts you into jumbo territory with different rules
  • Your debt-to-income ratio is tight; conventional underwriting is generally less forgiving there than FHA

The process

How it works

  1. 01

    You talk to a lender and they pull your actual credit, income, and debts. Everything after this is downstream of that file.

  2. 02

    They price it. On a conventional loan your credit score and your down payment both move the price, so small changes can matter.

  3. 03

    They compare it against the other programs you'd be eligible for and show you the monthly and the total, side by side.

  4. 04

    You get a pre-approval with a real number, and we go shopping with it instead of guessing.

The trade

What you get — and what to weigh

What you get

  • Mortgage insurance that ends — this is the single biggest structural advantage over FHA
  • Pricing that rewards a strong credit file, sometimes substantially
  • The widest range of property types: primary homes, second homes, and investment property
  • A loan that sellers and listing agents are entirely comfortable with, which quietly helps your offer

The trade-offs (straight talk)

  • Credit and debt-to-income standards are generally tighter than FHA — a weaker file can cost you more here than it would there
  • Mortgage insurance is priced off your credit score, so the same down payment costs two buyers different amounts
  • Above the conforming limit the rules change entirely and you're shopping a jumbo
  • Conventional loans generally cannot be assumed by a future buyer, because of the due-on-sale clause

Typically qualifies

  • • Documented income and a credit history a lender can read
  • • A down payment — the minimum is lower than most people think, and it varies by program and by lender
  • • A loan amount at or below the conforming limit, or you're in jumbo territory instead

“The mistake I see most often is a buyer assuming conventional is automatically the better loan because it sounds more respectable. It isn't automatically anything. For a strong credit file it is usually the cheapest option available. For a weaker one, an FHA loan can beat it by a meaningful amount every month. Which one you are is a lender's read on your actual file — not a guess, and not mine to make. Ask for both quotes, in writing, and compare the monthly payment and the total cost side by side.”

Homes sold
175+Homes sold
In closed sales
$54M+In closed sales
Texas markets served
2Texas markets served
Counties served today
6Counties served today

Career totals across two Texas markets — DFW, then Greater Houston.

Questions, answered

Frequently asked questions

It simply means the loan is not insured or guaranteed by a government program — so not FHA, not VA, not USDA. Most conventional loans are also 'conforming', which means they follow the rules set by Fannie Mae and Freddie Mac, including a maximum loan size. That is the whole definition. It says nothing about who you are; it describes who stands behind the loan.

Get it priced against the alternatives

I'm not a lender and I won't guess at your numbers.What I'll do is introduce you to lenders I work with and ask them to price conventional against everything else you're eligible for, so you're choosing from real quotes instead of assumptions.

Call (832) 709-2540

Talk to a lender

These are the lenders Allen works with who handle this kind of loan. For any of them you’d like to talk to, tap Make introduction — we’ll make the introduction for you.

Allen Markel is a licensed Texas REALTOR®, not a mortgage lender or loan originator. He does not quote rates or terms and does not decide whether you qualify — only a lender can do that. Introductions are a courtesy; you choose who to work with.

Allen Markel is a licensed Texas REALTOR®, not a mortgage lender, loan originator, or financial advisor. This page explains in general terms how a loan program works. It is not a loan offer, a rate quote, or a determination that you qualify for anything. Program rules, fees, and limits change, and individual lenders apply their own standards on top of them. Eligibility is decided by an approved lender, not by me.

Not sure this is the right path? Let's figure it out together.

A quick, no-pressure conversation is all it takes.

Browse homes for sale

Want to talk it through first? Pick a time.

Schedule time with Allen

Allen Markel, REALTOR® · Texas Premier Realty · TREC #0658294

Questions about Conventional Loan

What it is

  • Is a conventional loan the same as a conforming loan?

    Not exactly. Conventional means no government program stands behind the loan. Conforming means it also follows the national size and underwriting rules. Most conventional loans are conforming, and one above the size limit is a jumbo, which has its own page. A lender can tell you which category your numbers fall into.

  • What is PMI and why do I pay it?

    Private mortgage insurance protects the lender if you put down a smaller amount and then default. It is added to your payment, and what it costs depends on things like your credit score and down payment. It is a cost to weigh against a bigger down payment, and a lender can show you the numbers.

  • Who tends to do well with a conventional loan?

    Buyers with a solid credit history, earnings that are easy to document, and a down payment that gives the lender some comfort. Pricing tends to reward a clean file. It is also the route for many second homes and rentals. Whether you fit is a lender's read of your actual file, so talk to one early.

Who it fits

  • Can I use a conventional loan for a second home or investment property?

    Yes, and that is one of its advantages, since FHA, VA and USDA are generally meant for a home you will live in. Rules and pricing can be different for a second home or rental than for your own home. Ask a lender to quote the exact scenario you have in mind.

  • What if I am self-employed and want a conventional loan?

    It can work if your earnings can be documented the way the lender requires, which usually means tax returns that show what you earn. If write-offs lower the earnings a lender can count, other products may be discussed, and our non-QM page covers that. Timing and preparation matter a lot here.

  • Who should look at something other than conventional?

    Buyers with a thin or damaged credit file, a tight debt load, or eligibility for VA or USDA, where nothing down may be possible. FHA may be worth pricing for a weaker file. A loan originator can price those programs side by side for you, and we are happy to help you compare.

How it works

  • What documents will a lender ask for on a conventional loan?

    Typically pay records or business documentation, tax returns, bank statements, and details on your debts and the property. The exact list depends on the lender and your situation. Ask at the start so you can gather things while you shop for a home rather than scrambling after you are under contract.

  • What is a debt ratio and why does it matter to a lender?

    It compares your monthly debt payments with what you earn each month. Lenders use it to judge whether a new payment fits comfortably. Conventional underwriting is generally less forgiving of a tight ratio than FHA. Paying down debt before you apply can help, and a lender can tell you where you stand.

  • Should I get pre-approved before I start looking at homes?

    Yes, in most cases. A pre-approval gives you a real number, tells you how a lender reads your file, and lets us shop with confidence. It also makes your offer more credible to a seller. Procrastinating on it is how buyers lose a home they loved, so talk to a lender early.

  • Will shopping several lenders hurt my credit?

    Mortgage inquiries made within a short window are typically treated as one shopping effort by credit scoring, so comparing lenders is normally fine. Ask each lender how they handle it, and do your comparing close together. Shopping is how you find out which program and lender fit you.

  • Can I lock in my interest rate?

    Lenders generally offer a rate lock for a set period once you have a property under contract. How long it lasts and what it costs vary by lender. Ask what happens if closing slips past the lock, since that can matter when an appraisal or repair negotiation takes extra time.

  • Should my pre-approval be for the full amount I can borrow?

    Not necessarily. The amount a lender will approve is not the same as a payment you are comfortable with. We suggest deciding on a monthly number that fits your life and then using the pre-approval as a ceiling, not a target. Talk to us to find the right range for your circumstances.

  • Do I need to know which loan is right for me before I talk to a loan originator?

    No. A loan originator is licensed and regulated, takes your information, and runs it through the system to match you to a loan program that fits. Your part is to give accurate information and ask questions. A REALTOR is not a lender and does not approve or price loans. We help you use the originator's numbers to shop and write offers.

Costs to weigh

  • How does a bigger down payment change a conventional loan?

    Both the price of the loan and the cost of mortgage insurance respond to your down payment and credit. A larger down payment generally helps, but it also uses cash you may want in reserve. A lender can show you a few scenarios so you can see what each choice does to your monthly payment.

  • Can gift money be used for my down payment?

    Often it can, with documentation showing it is a true gift and not a loan. Rules differ by lender and by how the funds are handled. Tell your lender early if any part of your cash is coming from someone else, so it does not cause a surprise during underwriting.

  • Can the seller help pay my closing costs?

    Sellers can agree to contribute toward your costs as part of the offer, and lenders set limits on how much. It is a negotiating point, and whether it is wise depends on the price and the market. We can help you structure it and check the limits with your lender.

  • Should I compare the monthly payment or the total cost?

    Both. A lower payment can hide a higher total cost if mortgage insurance or the rate behaves differently over time. Ask the lender for the monthly payment and the total cost side by side, in writing, for every program you could use. That comparison is what lets you pick with confidence.

  • Do I have to keep paying mortgage insurance for the life of a conventional loan?

    Generally no. Conventional mortgage insurance is designed to end under rules covered on this page, which is its main structural advantage over FHA. The timing depends on your loan and its payment history. Ask your lender when it would drop off on your particular loan.

  • Besides the down payment, how much cash do I need to buy a home?

    Plan for closing costs, which generally run 2% to 5% of the purchase price, plus prepaid items such as insurance and taxes. That money is separate from your down payment and from earnest money. It varies by location, price, loan and lender. A loan originator can give you your numbers, and we can build your budget from them.

  • What are closing costs and why does nobody warn me about them?

    Closing costs are the fees to finish the loan and the sale, such as lender fees, title and escrow charges, and prepaid taxes and insurance. They generally run 2% to 5% of the price, and they often surface late because the focus is on the price and down payment. Ask a loan originator for a Loan Estimate early so nothing surprises you.

  • Who can pay my closing costs on a conventional loan?

    You can, the seller can through a concession, a loan originator can offer a lender credit in exchange for a higher rate, or it can be a mix. Conventional programs limit seller contributions by down payment: 3% with more than 90% loan-to-value, 6% from 90% to 75%, and 9% at 75% or less. Ask a loan originator how that applies to you, and talk to us about structuring the offer.

  • How do interest rate and points trade off?

    One point equals 1% of the loan amount, paid at closing to lower the interest rate. Paying points costs cash now and may reduce the payment, while taking a higher rate may lower your cash to close. Which fits depends on how long you expect to keep the loan. Ask a loan originator to show both options in writing.

  • What are a Loan Estimate and a Closing Disclosure?

    They are the standard federal forms that show the loan terms and costs. The Loan Estimate comes early, after you apply, so you can compare offers from different loan originators. The Closing Disclosure comes before closing so you can check the final numbers against the estimate. Ask questions about any line that surprises you.

Property and appraisal questions

  • What does the appraiser look at on a conventional loan?

    Mainly whether the home supports the price you agreed to pay, along with its general condition. It is less rigid than the minimum standards used on FHA and VA, though a lender can still raise a condition issue. An appraisal is not an inspection, so you still want your own.

  • What if the appraisal comes in below the price?

    You have choices: ask the seller to lower the price, bring more cash to cover the difference, challenge the appraisal with better comparable sales, or step away if your contract allows. What fits depends on the contract terms and your finances. We help you decide quickly, because the dates keep running.

  • Can I get a conventional loan on a home that needs repairs?

    It depends on how much work the home needs and what the lender will accept. Minor cosmetic needs rarely stop a loan, while serious condition problems can. Some renovation loan products exist, and a lender who writes them can explain. Tell us early so we flag homes that could be a problem.

  • Can I use a conventional loan to buy new construction?

    Generally yes, subject to the lender's requirements and the way the sale is structured. New homes bring their own timing questions, such as when the home is complete and ready for the final inspection. Ask your lender how they handle it before you sign a contract.

Offers and timing

  • How does a conventional loan help my offer?

    Sellers and listing agents are comfortable with it, which quietly helps. A solid pre-approval from a lender with a record of closing on time helps even more. We make sure your offer is clean and that the listing agent can reach your lender quickly if questions come up.

  • How long does a conventional loan take to close?

    Usually a few weeks once you are under contract, but it depends on the lender, the appraisal and how quickly you provide documents. Ask your lender for a realistic timeline and we will build the contract dates around it, so the closing date does not become a source of stress.

  • Is it a problem to open new credit before closing?

    It can be. New debt changes your numbers, and lenders often recheck credit shortly before closing. Hold off on financing a car, furniture or anything else until after you close, unless your lender says otherwise. Ask what to avoid and keep the lender informed of any change.

  • What is earnest money and is it part of my down payment?

    Earnest money is a deposit you make after your offer is accepted to show good faith, held by the title company. It is separate from your down payment and closing costs, though it is usually credited toward the cash due at closing. The amount is negotiated. Whether it is at risk depends on the contract terms and deadlines, which we walk you through before you sign.

Compared with other options

  • How does a conventional loan compare with a VA loan?

    If you are eligible for VA, that program can mean nothing down and no monthly mortgage insurance, which is hard for conventional to match. Conventional serves buyers who are not eligible and also investment and second homes. A lender can price both for you so you see the real difference.

  • How does conventional compare with USDA?

    USDA can offer financing with nothing down, but it adds an address test and an earnings limit that conventional does not have. Conventional is available on more properties. If your address and household qualify, ask a lender to price both so you can weigh payment against down payment.

  • What if my loan amount is close to the conforming limit?

    Ask the lender to price it both ways: as a jumbo, and as a conforming loan with a slightly larger down payment. Sometimes it changes nothing and sometimes it changes the price of the whole loan. It is your lender's arithmetic to run, and it is worth asking before you decide.

Getting started

  • When should I talk to a lender, before or after I find a home?

    Before. A lender can tell you what you qualify for, which program fits, and what to fix, and that shapes the homes we look at. Waiting until you are under contract compresses everything. Talk to us and we can introduce you to lenders so you are ready when the right home appears.

  • What should I do if one lender turns me down?

    Ask why, in specific terms. One lender's rules or overlays are not a verdict on you, and a second lender may see it differently. A different program, such as FHA, may also work better for your file. Do not give up after one answer, and talk to us about options.

  • What is your role versus the lender's?

    We are not lenders and we do not quote rates or decide whether you qualify. A lender does that. Our job is to introduce you to lenders we work with, help you compare their quotes, write the offer around the loan's timeline, and flag homes that could cause trouble.

  • What is the difference between pre-qualification and pre-approval?

    A pre-qualification is usually a quick estimate based on what you tell a loan originator, often without documents. A pre-approval means the originator has reviewed your documents and credit and issued a letter saying what they are prepared to lend, subject to conditions such as the appraisal. Sellers give a pre-approval more weight. A REALTOR does not issue either one. A loan originator does.

  • What should I avoid between pre-approval and closing?

    Avoid new debt, large purchases on credit, unexplained money moving between accounts, and changes to how you are paid without telling your loan originator first. Lenders re-check your file before closing, so anything that shifts it can delay or derail the loan. When in doubt, call the originator before you act. Talk to us if you are unsure.

After you close

  • Can my loan be sold to another company after I close?

    Yes, loans are often sold or serviced by a different company after closing. The company collecting your payments may change while the loan terms stay as written in your closing documents. Ask your loan originator at the start how servicing transfers are handled and what notices to expect, then read any notice you receive carefully.

See all questions