Conventional Loan

A type of mortgage that is not insured or guaranteed by a government agency, such as the Federal Housing Administration or the Department of Veterans Affairs.

What Is A Conventional Loan?

Conventional loans are mortgage loans that are not insured by a government agency. They are offered by lenders and financial institutions that are considered Government Sponsored Entities (GSE.) Conventional loans may have a higher credit score requirements and have stricter income and debt-to-income ratio requirements than government backed loans. However, they often have lower interest rates, making them a more cost-effective option for those who qualify. These loans are often underwritten with Fannie Mae or Freddie Mac guidelines, but can also be private money or portfolio type loans that a bank or mortgage institution funds but does not sell on the open market. If you have a good credit score and a solid financial history, a conventional loan may be a good choice for you.

The Benefits of Conventional Loans

  • Fixed interest rate
  • No government backing
  • Lower credit score requirement
  • Larger loan amounts available
  • May be able to avoid mortgage insurance

Who Should Consider a Conventional Loan?

  • Borrowers with good credit scores and steady income
  • Borrowers with a down payment of at least 3%
  • Borrowers who plan to stay in the home for a long period of time

Eligibility Guide

  • Have good credit score (usually at least 620)
  • Have enough income to cover mortgage payments
  • Have stable employment history
  • Have sufficient funds for down payment and closing costs
  • Meet debt-to-income ratio requirements
  • Property meets certain condition and value requirements

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