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30-Year Fixed Mortgage – The Classic Choice

his is the most common mortgage. You get steady, predictable payments over 30 years, which keeps your monthly bill lower than a 15-year loan. You’ll pay more interest over time, but your budget will thank you.

Best for: First-time homebuyers & anyone looking for a manageable monthly payment.​

  • Pros:
  • Lower monthly payments = more wiggle room in your budget
  • Predictable payments for 30 years
  • Easier to qualify for compared to shorter loans
  • Cons:
  • Pay more interest over time
  • Takes longer to build equity in your home

A conventional mortgage is one of the most common types of home loans. Unlike government-backed loans (like FHA, VA, or USDA loans), conventional loans are funded by private lenders and must meet certain guidelines set by Fannie Mae & Freddie Mac—two big names in the mortgage world.

But who are Fannie & Freddie, and why do their rules matter? Let’s break it down.

Who Is Fannie and Freddie?

Fannie Mae & Freddie Mac are government-sponsored enterprises (GSEs) that keep the mortgage industry running smoothly.

  • Fannie Mae (1938) → Created during The New Deal to help more Americans afford homes. Became privatized in 1968.
  • Freddie Mac (1970) → Introduced later to increase competition in the mortgage market.
  • Why It Matters: This frees up cash for lenders so they can continue making home loans.
  • What They Do: They buy mortgages from banks & lenders, bundle them into mortgage-backed securities (MBS), and sell them to investors.

Why Do Banks Sell Mortgages?

Imagine a bank gives you a $250,000 mortgage. Instead of waiting 30 years for you to pay it off little by little, the bank sells your loan to Fannie Mae or Freddie Mac. This frees up cash so they can offer more home loans to other buyers.

🏦 Think of it like this: If banks held onto every mortgage for 30 years, they’d run out of money to lend for new home loans, car loans, and credit cards. Selling mortgages keeps the market moving!

What Kind of Mortgages Do Fannie & Freddie Buy?

To be eligible, a loan must:

  • Stay within the conforming loan limit (set annually)
  • Have borrowers who meet minimum credit score requirements
  • Meet debt-to-income (DTI) ratio guidelines
  • What They Do: They Require private mortgage insurance (PMI) if down payment is less than 20%buy mortgages from banks & lenders, bundle them into mortgage-backed securities (MBS), and sell them to investors.
  • Follow additional underwriting rules set by the GSEs

Important: Fannie & Freddie don’t service loans—they just buy them. Your lender still collects your monthly payments.

Feature

Min Credit Score

Down Payment

PMI

Best for

FHA Loan

580+ (3.5% down)

3.5% (can be gifted)

Required for life of the loan

First-time buyers, lower credit

Conventional Loan

620+ (5-20% down)

5-20% (lower PMI if 20%)

Can be removed at 20% equity

Good credit, larger down payment

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