Jarrod Manley Mortgage Group
Built for Long-Term Wealth. Available at 3% Down.

Conventional Loans
in Alabama
Lower Long-Term Cost. Cancellable PMI.

Conventional loans are the most versatile mortgage available — from 3% down with HomeReady or Home Possible, to 5% standard, all the way to 20% to eliminate PMI entirely. For buyers with solid credit profiles, conventional typically delivers a lower total long-term cost than FHA — and the flexibility to use it for primary residences, second homes, and investment properties alike.

3% Down with HomeReady / Home Possible
PMI Cancels at 20% Equity
First-Time & Repeat Buyers
Second Homes & Investment Properties
Jarrod Manley, Founder and Senior Mortgage Advisor at Jarrod Manley Mortgage Group, conventional loan specialist serving Alabama first-time and move-up buyers

Jarrod Manley

Conventional Loan Specialist — All of Alabama

5-Star Rated
Conventional Loan Overview

The Most Versatile Mortgage in Alabama — Not Just for High-Down-Payment Buyers

Conventional loans are backed by Fannie Mae and Freddie Mac — not the federal government — and they represent the standard for most Alabama purchase and refinance transactions. They're available at 3% down, offer PMI that cancels automatically at 20% equity, and carry rate pricing that rewards buyers with stronger credit profiles.

For first-time buyers with a 680+ credit score and a modest down payment, conventional often produces a lower total monthly cost than FHA. For move-up buyers with equity from a prior sale, conventional is almost always the answer. And for buyers purchasing a second home or investment property, conventional is the only option among standard loan types.

3% down via HomeReady or Home Possible
5% down standard conventional — any buyer
PMI cancels by law at 20% equity
Rate pricing rewards higher credit scores
No lifetime mortgage insurance (unlike FHA)
Second homes and investment properties eligible
No property condition MPRs (unlike FHA)
Refinance path from FHA when equity builds
Down Payment Options

Conventional Loan Down Payment Tiers — and What Changes at Each Level

Each tier unlocks different benefits. Understanding the tradeoffs at 3%, 5%, 10%, and 20% helps buyers choose the down payment that fits their financial picture — not just the one that's "standard."

Entry Point

3%

HomeReady / Home Possible

  • First-time and qualifying repeat buyers
  • Income limits apply (80% of area median)
  • Reduced PMI rates vs. standard 3% down
  • Homebuyer education course required
  • Non-borrower household income may count
Most Common

5%

Standard Conventional

  • Any buyer — no income limits
  • No homebuyer education required
  • PMI required until 20% equity
  • PMI rate tied to credit score
  • Competitive rates for 680+ credit
Lower PMI Cost

10%

Standard Conventional

  • Meaningfully lower PMI premiums
  • Better rate pricing at most lenders
  • Available for second home purchase
  • Faster path to PMI cancellation
  • Often used by move-up buyers with equity
No PMI

20%

Standard Conventional

  • No private mortgage insurance required
  • Lowest available rate tier
  • Maximum seller concession flexibility
  • Investment properties qualify at 25%
  • Strongest offer in competitive markets
PMI vs. FHA MIP

Why Cancellable PMI Changes the Long-Term Math

The biggest long-term advantage of conventional over FHA is simple: PMI goes away. FHA's annual mortgage insurance doesn't — for the life of the loan at under 10% down. Here's what that difference looks like over time.

Conventional PMI

Cancellable

  • Required below 20% down payment
  • Rate determined by credit score and LTV
  • Typically 0.2%–1.5% of loan amount annually
  • Must cancel at 20% equity (Homeowners Protection Act)
  • Auto-cancels at 22% equity by law
  • Can remove early via appraisal if home appreciates
  • Can be eliminated by refinancing when equity reaches 20%

FHA MIP

Lifetime (at <10% Down)

  • Upfront MIP: 1.75% of loan (financed in)
  • Annual MIP: ~0.55% of loan balance monthly
  • Stays for life of loan at under 10% down
  • Only way to remove: refinance into conventional
  • FHA Streamline Refinance does not remove MIP
  • Adds $91/month per $200K borrowed (vs. 0 after PMI cancels)
  • FHA buyers should plan their conventional refinance timeline

The Bottom Line on FHA vs. Conventional

For buyers with a 680+ credit score and 5% down, conventional frequently costs less per month than FHA — even before PMI cancellation. For buyers with a 580–640 score, FHA is often the better near-term fit. We model both scenarios side by side for every buyer who is eligible for either — and let the numbers make the recommendation.

3% Down Programs

HomeReady & Home Possible: 3% Down Conventional for Qualifying Buyers

Both programs exist specifically to bring conventional loan benefits — including cancellable PMI — to buyers who haven't yet saved a 5% or 20% down payment, while keeping income requirements realistic for Alabama's housing market.

Fannie Mae HomeReady

Fannie Mae Program

3%
  • Income limit: 80% of area median income
  • Available to first-time and repeat buyers
  • Reduced PMI rates vs. standard conventional
  • Non-borrower household income can count toward qualification
  • Mandatory online homebuyer education course
  • Single-family homes, condos, and 2–4 unit properties
  • Gift funds and grants accepted for down payment

Standout Feature

The non-borrower household income feature is unique — a buyer sharing a home with a parent, sibling, or roommate may qualify for more than their own income suggests.

Freddie Mac Home Possible

Freddie Mac Program

3%
  • Income limit: 80% of area median income
  • Available to first-time and repeat buyers
  • Reduced PMI rates vs. standard conventional
  • Sweat equity accepted as part of down payment
  • Mandatory homebuyer education for first-time buyers
  • Single-family homes, condos, and 2–4 unit properties
  • Boarder income can be considered for qualification

Standout Feature

Sweat equity acceptance is a standout feature — buyers who make qualifying improvements to a property can have that work count toward their down payment requirement.

Move-Up Buyers & Wealth Building

Conventional Is the Standard for Move-Up Buyers and Long-Term Homeownership

The equity from your first home becomes the down payment on the next. When that equity exceeds 20%, conventional is almost always the answer — and it's the vehicle that builds the next tier of wealth.

Using Sale Equity as Your Down Payment

Proceeds from a home sale become your down payment on the next purchase. Buyers who've owned for 5+ years often have enough equity to hit 10%, 15%, or 20% down — eliminating PMI or significantly reducing it. We model exactly how your sale proceeds affect the next transaction.

Rate Pricing That Rewards Your Credit History

Buyers who've been homeowners for years often have stronger credit profiles. Conventional pricing rewards this — each tier up in credit score reduces the rate. A buyer at 760 accesses a meaningfully different rate than one at 680, and we show that gap in real dollar terms at pre-qualification.

Investment Properties and Second Homes

Conventional is the only standard loan type available for non-primary residences. If a buyer is ready to invest in a rental property or buy a vacation home, conventional is the tool — with 10% down for second homes and 15%–25% for investment properties depending on type.

Myths vs. Facts

Common Misconceptions About Conventional Loans

These misunderstandings lead buyers to FHA when conventional would have cost them less — or keep them waiting when they could already qualify.

Common Myth

"You need 20% down to get a conventional loan."

The Fact

Conventional loans are available at 3% down through HomeReady and Home Possible, and at 5% down for standard conventional. PMI applies below 20%, but it's cancellable — which is a significant advantage over FHA's lifetime mortgage insurance for loans under 10% down.

Common Myth

"Conventional loans are always better than FHA."

The Fact

Conventional is better for buyers with 740+ credit scores who can take full advantage of the rate tiering. For buyers in the 580–679 range, FHA can actually produce a lower monthly payment. We model both scenarios for every buyer — there's no single right answer across the board.

Common Myth

"PMI is permanent and not worth paying."

The Fact

PMI cancels by law at 20% equity — FHA's MIP does not (for loans originated with under 10% down). A buyer who pays PMI for 6–7 years and then cancels it often pays far less in total mortgage insurance than an FHA borrower who carries lifetime MIP. The long-term math usually favors conventional for buyers with strong credit.

Common Myth

"Conventional loans have stricter appraisal requirements than FHA."

The Fact

Conventional appraisals do not include the Minimum Property Requirements that FHA appraisers apply. A property that might require repairs to pass an FHA appraisal could appraise without issue under conventional guidelines — which makes conventional a better fit for older homes in need of some updating.

Why Alabama Buyers Choose JMMG

Choosing the Right Loan Requires Honest Comparison Work

The decision between conventional and FHA should be made with real numbers, not a rule of thumb. We do that comparison for every buyer who qualifies for both — and we always recommend the loan that produces the better long-term outcome.

FHA vs. Conventional Modeled Side by Side

Every buyer who qualifies for both gets a side-by-side payment comparison — monthly cost, total MIP vs. PMI over the loan life, and the crossover point where conventional becomes cheaper.

HomeReady and Home Possible Evaluated Together

We run both 3% programs for every qualifying buyer and recommend the one that produces the better rate and PMI combination — not just the first one that fits.

PMI Cancellation Strategy Planned Upfront

We discuss the timeline to PMI removal at pre-approval — whether through scheduled paydown, appreciation, or a targeted refinance — so buyers know what to expect before they close.

Move-Up Buyer Math Worked Through Clearly

If you're selling a home to buy the next one, we run the full picture: net proceeds from the sale, down payment tier on the purchase, and resulting monthly payment and PMI scenario.

Credit Score Impact Shown in Real Dollars

Conventional pricing is credit-score dependent. We show every buyer the rate at their current score — and what improving it by 20–40 points would save them monthly and over the loan's life.

Direct Access from Application Through Closing

Jarrod manages every file personally. Conventional or FHA, first-time or move-up, purchase or refinance — you reach him directly, not a system that routes you to whoever's available.

Common Questions

Frequently Asked Questions About Conventional Loans

Straight answers for Alabama first-time buyers, move-up buyers, and the agents who work with them.

Find Out Which Loan Is Right for You

See Your Conventional Loan Options — With Real Numbers

We compare conventional, FHA, USDA, and VA side by side for every buyer who qualifies for more than one option. The loan that fits your credit score, down payment, and timeline is the one we recommend — not the one that's easiest to explain.

More from Jarrod Manley Mortgage Group

Serving first-time buyers, move-up buyers, and agents across all of Alabama.