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Fannie Mae & Freddie Mac FinancingConventional loans built around your credit, not a one-size formula
As a brokerage, North Bay Capital shops many lenders to find the conventional loan that fits you — low down payments, mortgage insurance that actually goes away, and high-balance options for Sonoma County and California prices.
Conventional loans are mortgages backed by Fannie Mae or Freddie Mac, available with 3% to 20%-plus down. Unlike FHA, the mortgage insurance is cancellable and there is no upfront premium, which makes them a strong fit for buyers with decent credit who want to stop paying for insurance once they build equity.
Programs we broker
The options under conventional loans — and the right fit for each.
Conventional 97 (3% Down Purchase)
A true 3%-down conventional loan for qualified first-time and repeat buyers.
Conventional 97 is Fannie Mae and Freddie Mac's answer to FHA for buyers who have strong credit but limited down payment savings. You put 3% down on a single-unit primary residence, and the loan follows standard conforming guidelines — fixed rate, no upfront mortgage insurance, and PMI that drops off automatically once you hit 22% equity.
Because it's conventional, the long-term cost is often lower than FHA when credit scores are 740+. For Sonoma County buyers competing in a tight market, that 3% down threshold can be the difference between renting another year and closing this fall.
- First-time buyers with strong credit but thin savings
- Repeat buyers who haven't owned in the past 3 years
- Buyers who'd rather avoid FHA's lifetime MIP
Fannie Mae HomeReady (3% Down, Income-Based Pricing)
Discounted rates and reduced PMI for borrowers at or below 80% of area median income.
HomeReady is Fannie's affordable lending program. If your qualifying income is at or below 80% of the area median income for the property's census tract, you get reduced mortgage insurance coverage, better rate adjustments, and flexible underwriting on things like boarder income and non-occupant co-borrowers.
It's one of the most underused programs I see. In parts of Sonoma County and the broader Bay Area, the AMI thresholds are higher than people assume — it's worth running your numbers before defaulting to a standard Conventional 97.
- Lower-to-moderate income buyers in higher-cost areas
- Multigenerational households pooling income
- Buyers in census tracts with favorable AMI limits
Freddie Mac Home Possible (3% Down, Income-Based Pricing)
Freddie's affordable answer to HomeReady — similar benefits, different overlays.
Home Possible mirrors HomeReady in most ways: 3% down, 80% AMI income cap, reduced PMI, and credit for rental and boarder income. The differences show up in the fine print — Freddie's overlays on credit, reserves, and manufactured housing sometimes fit a file that Fannie won't.
When a borrower is on the edge, I'll often run the loan through both Desktop Underwriter and Loan Product Advisor to see which agency gives the cleaner approval and better pricing. Same down payment, sometimes meaningfully different terms.
- Income-qualified buyers whose file fits Freddie better than Fannie
- 2-4 unit owner-occupied purchases with rental income
- Buyers needing flexibility on reserves or credit history
Standard Conventional Loan (5%–20%+ Down)
The conforming workhorse — flexible terms, no income caps, predictable pricing.
This is the standard Fannie/Freddie conforming loan most buyers end up with. You can put down anywhere from 5% to 20% or more, choose 15-, 20-, 25-, or 30-year fixed terms, or look at ARMs if you have a clear exit horizon. Above 20% down there's no PMI, and below that PMI drops off automatically as you build equity.
For buyers with strong credit and a 20% down payment, this is usually the cheapest mortgage available. We'll compare it head-to-head against jumbo, FHA, and VA when those apply, but for most California purchases under the conforming limit, conventional wins on long-term cost.
- Move-up buyers with built-up equity from a prior sale
- Refinances out of FHA to drop mortgage insurance
- Buyers who don't fit affordable program income caps
Fannie Mae HomeStyle Renovation Loan
Buy or refinance and finance the renovation in one conventional loan.
HomeStyle Renovation lets you roll the cost of repairs, remodels, or full renovations into a single conventional mortgage based on the home's after-improved value. Unlike FHA 203(k), there's no list of restricted improvements — luxury items, pools, ADUs, and structural work are all on the table as long as they're permanent.
It's the right tool when you're buying a fixer in Sonoma County or refinancing a home you already own and want to fund a serious remodel without a separate construction or HELOC. We coordinate the contractor bids, draws, and final inspection inside the loan.
- Buying a dated home in a great neighborhood and updating it
- Refi-plus-remodel for kitchen, addition, or ADU build
- Investors rehabbing a single-unit rental conventionally
Freddie Mac CHOICERenovation Loan
Freddie's renovation loan — broader resilience and disaster-repair eligibility.
CHOICERenovation is Freddie's version of HomeStyle and works similarly: one conventional loan, one closing, financed based on after-improved value. Where it shines is on resilience and disaster-mitigation work — wildfire hardening, defensible space, seismic retrofits — which is directly relevant for a lot of Northern California homeowners.
Freddie also allows borrowers to be reimbursed for certain DIY-style or pre-closing repair costs in specific situations, which HomeStyle handles differently. When a file fits Freddie better — credit profile, property type, or reno scope — this is the path we take.
- California homeowners doing wildfire or seismic hardening
- Buyers purchasing a home that needs major systems updated
- Refi-plus-renovation when Freddie pricing beats Fannie
Freddie Mac CHOICEReno eXpress (Limited Renovation)
Streamlined reno financing for smaller projects — less paperwork, faster close.
CHOICEReno eXpress is the lighter-touch version of CHOICERenovation. It's built for smaller-budget projects — typically capped at a percentage of the as-completed value (verify current limit) — with reduced documentation, no required HUD consultant on most files, and a quicker path to closing.
If you're doing a kitchen refresh, new roof, HVAC replacement, or cosmetic updates rather than a gut remodel, eXpress is usually the right fit. You get renovation financing without the full construction-style oversight.
- Cosmetic updates: kitchen, baths, flooring, paint
- Roof, HVAC, or single-system replacement at purchase
- Buyers who want reno money but not a full 203(k)-style file
Fannie Mae HomeStyle Energy
Finance efficiency upgrades, solar, or resilience work inside a conventional loan.
HomeStyle Energy lets you bundle energy- and water-efficiency improvements — solar, insulation, high-efficiency HVAC, windows, water systems — and certain resilience upgrades into a purchase or refinance. It can also be used to pay off an existing PACE assessment, which is a common cleanup move when refinancing.
Compared to a separate solar loan or PACE financing, rolling these costs into a first mortgage often lowers the all-in rate and consolidates payments. We'll model both paths so you can see the real spread.
- Adding solar at purchase or refinance
- Paying off a PACE/HERO assessment on a refi
- HVAC, insulation, or window upgrades for an older home
Conventional Investment Property Loan (Non-Owner-Occupied)
Conforming financing for 1-4 unit rentals — fixed or ARM, up to 10 financed properties.
For non-owner-occupied rentals, conventional financing is usually the cheapest long-term money available. Down payments start around 15% on a single-unit (20-25% is more typical for best pricing) and 25% on 2-4 units. Rates carry an investment-property adjustment, but the underlying terms are standard conforming — 30-year fixed, no balloon, no prepay penalty.
Fannie and Freddie allow up to 10 financed properties per borrower, with tightening reserve and documentation requirements as you scale. For investors building a portfolio in Sonoma County, this is the foundation before you ever look at DSCR or commercial debt.
- First rental purchase by a W-2 buy-and-hold investor
- Cash-out refi on an existing rental to fund the next purchase
- Small portfolio investor staying out of DSCR pricing
Conventional Second Home Loan
Conforming financing for a vacation home, getaway, or part-time residence.
Second home loans are conventional financing for properties you use personally but don't live in full-time — a wine country getaway, a coastal cabin, a place near family. The property has to be a reasonable distance from your primary, suitable for year-round use, and under your control (not in a mandatory rental pool).
Pricing sits between primary and investment property. Down payments typically start at 10% with strong credit, though 20%+ is common to avoid PMI and get the cleanest rate. We'll structure it so the occupancy story is documented correctly from day one — that piece matters.
- Sonoma or Napa wine country getaway purchase
- Coastal or mountain vacation home for personal use
- Part-time residence near adult children or aging parents
Calculators for this loan
Mortgage Payment & Amortization
Monthly payment, full amortization schedule, and interest totals.
Mortgage Affordability
How much home you can comfortably afford based on income and debts.
Debt-to-Income
Front-end and back-end DTI versus lender thresholds.
Down Payment
Target down payment, PMI impact, and savings timelines.
What people ask before they apply
What is the difference between a conventional loan and an FHA loan?
The biggest practical difference is mortgage insurance. FHA loans carry both an upfront mortgage insurance premium and an annual premium that, in most cases, stays for the life of the loan. A conventional loan has no upfront premium, and its private mortgage insurance can be cancelled once you build enough equity. FHA can be easier to qualify for with lower credit, but conventional often costs less over time for borrowers with decent credit.
How much do I need to put down on a conventional loan?
As little as 3% on a primary residence through programs like HomeReady and Home Possible, or 5% on a standard conventional loan. Putting down 20% lets you skip private mortgage insurance entirely. Most buyers land somewhere in between, and we can model how different down payments change your rate and monthly payment.
When does PMI go away on a conventional loan?
By federal law, your lender must automatically cancel PMI once your loan balance reaches 78% of the home's original value, assuming you are current on payments. You can also request cancellation earlier, typically at 80% loan-to-value. This is a key advantage over FHA, where the mortgage insurance usually cannot be removed without refinancing.
What credit score do I need for a conventional loan?
Most conventional loans require a minimum credit score around 620, though stronger scores earn better pricing. Conventional pricing is risk-based, so a borrower with a 760 score and 20% down will usually see a noticeably lower rate than one at 620. If your score is on the lower end, we can compare conventional against FHA to see which is the better overall deal.
What are the conforming loan limits for 2026?
For 2026, the baseline conforming limit for a one-unit property is $832,750 in most of the country, set by the Federal Housing Finance Agency. In high-cost areas, including many California counties, the limit rises up to a ceiling of $1,249,125 for one-unit homes. These limits are updated every year, so we confirm the figure for your specific county before you lock.
Can I use a conventional loan for an investment property or second home?
Yes. Conventional financing is one of the few options that covers second homes and investment properties, not just primary residences. Down-payment requirements are higher for these — often 10% or more for a second home and 15% to 25% for an investment property — and the rate is typically a bit higher to reflect the added risk.
Is a conventional loan better than FHA for my situation?
It depends on your credit, your down payment, and how long you plan to keep the home. Borrowers with good credit who can put down at least 5% often save money with conventional because the mortgage insurance cancels and there is no upfront premium. Lower-credit borrowers sometimes do better with FHA. Because we are a brokerage, we run both side by side rather than steering you toward one product.
Jesse Gonzalez, President & Founder
NMLS #278103 · CA DRE #01855372 · Last reviewed June 24, 2026
Find out if a conventional loan is your lowest-cost path
Every borrower's numbers are different, and the only way to know whether conventional, HomeReady, or a high-balance loan fits best is to run them. Call Jesse Gonzalez at North Bay Capital at 707-595-5393, or email jesse@northbaycap.com, and we will compare real lender offers for your scenario — no pressure, just plain answers.