Considered a basic mortgage loan, a conventional loan simply refers to a mortgage that comes from a private lender like a bank and isn’t backed or insured by a government program. Conventional loans can be “conforming,” the most common loan type, or “nonconforming.”
Conventional home loans are mortgage loans that are not insured or guaranteed by a government agency like the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). Instead, these loans are offered by private lenders such as banks, credit unions, and mortgage companies.
Breakdown
Conventional home loans are mortgage loans that are not insured or guaranteed by a government agency like the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). Instead, these loans are offered by private lenders such as banks, credit unions, and mortgage companies. Here is some general information about conventional home loans, but keep in mind that specific details may vary among lenders:
Credit Requirements
Generally, conventional loans may have stricter credit requirements compared to government-backed loans. Lenders typically prefer borrowers with a solid credit history and a higher credit score.
Down Payment
Conventional loans often require a higher down payment compared to FHA loans, for example. The down payment requirement can vary but is commonly around 5% to 20% of the home's purchase price.
Loan Limits
There are limits on the amount you can borrow with a conventional loan. These limits may vary depending on the area and are set by the Federal Housing Finance Agency (FHFA).
Private Mortgage Insurance (PMI)
If you put down less than 20% of the home's purchase price, you may be required to pay private mortgage insurance (PMI) to protect the lender in case of default. Once you have built up enough equity, you can typically request the removal of PMI.
Interest Rates
Conventional loan interest rates can vary among lenders, and they are influenced by factors such as credit score, down payment amount, and market conditions. It's essential to shop around for the best interest rates and loan terms.
Loan Types
Conventional loans come in various types, including fixed-rate mortgages and adjustable-rate mortgages (ARMs). Fixed-rate mortgages have a constant interest rate over the life of the loan, while ARMs have a variable interest rate that can change at specified intervals.
For more specific information, including current interest rates, eligibility criteria, and application processes, it's recommended to visit the websites of reputable lenders or financial institutions that offer conventional home loans. These websites often provide tools and resources to help you understand the loan process, calculate payments, and even apply online. Always make sure to carefully review the terms and conditions of any loan before proceeding.
