Conventional Loans in California

For California buyers, conventional loans are especially valuable. Whether you're purchasing a starter home in Riverside County, refinancing in Temecula, or buying an investment property in Los Angeles, conventional financing adapts to your goals.

What is a Conventional Loan?

A conventional loan is a mortgage that is not guaranteed or insured by any government agency (like FHA, VA, or USDA). Instead, private lenders originate these loans, and they are typically bought and sold on the secondary mortgage market by Fannie Mae and Freddie Mac.

Because the lender assumes more risk without government backing, conventional loans generally require stronger credit and income documentation. In exchange, borrowers benefit from lower mortgage insurance costs, faster approval times, and more property type flexibility.

2026 Conforming Loan Limits in California

Conventional loans fall into two categories based on loan amount:

Conforming loans follow Fannie Mae and Freddie Mac guidelines and stay within set loan limits. In most California counties, the 2026 conforming limit is $766,550 for a single-family home.

High-balance conforming loans apply in high-cost counties where median home prices exceed the baseline limit. In California's most expensive counties — including Los Angeles, Orange, San Diego, San Francisco, Santa Clara, and Alameda — conforming limits extend up to $1,149,825.

Jumbo loans are required for loan amounts above the high-balance limit. FIG Homes & Loans offers both conforming and jumbo conventional products with competitive wholesale rates.

Key Advantages

• Down payments as low as 3% for first-time homebuyers
• No upfront mortgage insurance fee (unlike FHA's 1.75% UFMIP)
• Private Mortgage Insurance (PMI) can be cancelled once you reach 20% equity
• Available for primary residences, second homes, and investment properties
• Faster closing times compared to government-backed loans
• Flexible term lengths: 10, 15, 20, or 30 years
• Rate options: fixed-rate or adjustable-rate

Fixed-Rate vs. Adjustable-Rate Conventional Loans

Fixed-Rate Mortgage

A fixed-rate conventional loan locks in your interest rate for the entire term of the loan — typically 15 or 30 years. Your principal and interest payment stays exactly the same from month one to month 360, making budgeting predictable and protecting you from rising interest rates.

Best for:

• Buyers planning to stay in their home 7 years or longer
• Borrowers who value payment stability over maximum savings
• First-time buyers building long-term equity

Available terms: 10-year, 15-year, 20-year, 30-year

Adjustable-Rate Mortgage (ARM)

An adjustable-rate conventional loan offers a fixed interest rate for an initial period — commonly 5, 7, or 10 years — after which the rate adjusts annually based on a market index plus a margin. ARMs typically start with lower rates than fixed loans, offering short-term savings.

ARM structure example: A 7/1 ARM means the rate is fixed for 7 years, then adjusts once per year.

Best for:

• Buyers planning to sell or refinance within 5–10 years
• Borrowers expecting income growth
• California investors seeking lower initial payments on short-term holds

Important: All ARMs have caps that limit how much the rate can increase at each adjustment and over the life of the loan.

Which is Right for You?

The choice between fixed and adjustable depends on your time horizon, risk tolerance, and financial goals. In California's competitive markets, a 7/1 ARM can provide lower initial payments that help you qualify for more home. A 30-year fixed offers peace of mind if rates rise.

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Who Qualifies for a Conventional Loan?

• Credit score of 620 or higher (680+ recommended for best rates)
• Stable, verifiable income (typically 2 years in same field)
• Debt-to-income ratio usually below 45% (up to 50% with strong compensating factors)
• Down payment: 3% minimum for first-time buyers, 5% for repeat buyers
• Cash reserves: 2–6 months of mortgage payments in the bank
• Clean credit history: No bankruptcies, foreclosures, or short sales within required waiting periods

California-Specific Notes

Self-employed borrowers in California's gig economy and tech sectors can qualify with 2 years of tax returns or bank statements. For high-cost markets like the Bay Area or Orange County, conventional high-balance loans allow larger loan amounts without jumping to jumbo underwriting standards.

The Process

1. Pre-Approval: We review your credit, income, and assets to determine your buying power and issue a pre-approval letter.
2. House Hunting & Offer: Search California listings and make offers with confidence. Sellers prefer conventional buyers because closing is faster and more certain.
3. Loan Application & Processing: We gather documentation, order an appraisal, and submit your file to underwriting.
4. Underwriting: Our underwriter verifies all information against Fannie Mae/Freddie Mac guidelines.
5. Closing: Sign final documents and receive your keys. Conventional loans typically close in 21–30 days.

Is PMI Required?

If your down payment is less than 20% of the home's purchase price, you will pay Private Mortgage Insurance (PMI). Unlike FHA's mortgage insurance, PMI on a conventional loan can be removed once you reach 20% equity — either by paying down principal, home appreciation, or a combination of both.

California advantage: With California's historically strong appreciation, many borrowers reach 20% equity faster than the national average, allowing earlier PMI cancellation.

Why Conventional Loans Dominate in California

California's high home prices and competitive markets make conventional loans the financing tool of choice for serious buyers. In Riverside County, where the median home price sits around $600,000–$650,000, conventional loans cover most purchases without requiring jumbo underwriting.

In high-cost coastal counties, conventional high-balance loans bridge the gap between standard conforming and jumbo, giving buyers access to better rates without full jumbo requirements. And for California investors, conventional financing for second homes and rentals is available with competitive terms through our wholesale lender network.