Conventional Loans
Conventional loans are a popular option for homebuyers, as they are not backed by any government agency. These loans typically require borrowers to have higher credit scores and larger down payments compared to government-backed loans, such as FHA or VA loans. Because they are offered by private lenders, conventional loans provide greater flexibility in terms of loan terms and property types.
However, they can be more challenging to qualify for, especially for buyers with limited financial history or those unable to make a sizable down payment.
Conventional loans are ideal for individuals with strong credit and stable finances who are looking for competitive interest rates and fewer restrictions.
Frequently Asked Questions
A conventional loan is a mortgage not insured by the government, typically conforming to guidelines set by Fannie Mae and Freddie Mac. Unlike FHA or VA loans, conventional loans often require higher credit scores and larger down payments but don’t come with specific government fees, like FHA’s mortgage insurance premiums or the VA funding fee.
Most lenders require a minimum credit score of 620 for a conventional loan, though a higher score (typically 700+) can help secure better interest rates and terms. Those with excellent credit may also qualify for lower down payment options and avoid private mortgage insurance (PMI) with a down payment of 20% or more.
Conventional loans offer flexibility, including lower monthly costs if you can make a 20% down payment (as this eliminates PMI). They are available for primary homes, investment properties, and second homes, unlike FHA and VA loans, which are typically for primary residences only. Additionally, they tend to have fewer upfront fees than government-backed loans.