A conventional loan is a type of mortgage loan that is not part of a specific government program, such as the Federal Housing Administration (FHA), Department of Agriculture (USDA) or the Department of Veterans’ Affairs (VA) loan programs. However, conventional loans are commonly interchangeable with “Conforming Loans”, since they are required to conform to Fannie Mae and Freddie Mac’s underwriting requirements and loan limits.
Most home buyers choose conventional mortgages because they offer the best interest rates and loan terms, usually resulting in a lower monthly payment. And since most people choose a fixed-rate loan over an adjustable-rate mortgage, they don’t have to worry about rising mortgage rates, which makes it easier to budget.
To qualify for a Conventional Loan you must:
♦ Prove a stable income
♦ Have a good credit score
♦ Make a sizeable down payment (3 - 25%)
Benefits of a Conventional home loan:
1. Faster home loan processing
2. Reduce or avoid Mortgage Insurance Premium
3. Lower mortgage interest rates
4. Ability to compare lender fees