Conventional Loan

Traditional Financing for Home Buyers

Quick Summary

Conventional loans are the most common type of mortgage, offering fixed or adjustable interest rates and a range of terms for borrowers with good credit and stable income.

What is a Conventional Loan?

A conventional loan is a type of mortgage that is not insured or guaranteed by the government. Instead, it is backed by private lenders, such as banks or credit unions. These loans adhere to the guidelines set by two major enterprises: Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). Conventional loans are popular among homebuyers due to their flexibility in terms of property types, loan amounts, and repayment options.

Is a Conventional Loan Right for me?

Determining whether a conventional loan is the best fit for your mortgage needs depends on several factors. Consider the following:

  1. Credit Score: Conventional loans typically require higher credit scores compared to government-backed loans. If you have a credit score of 620 or higher, you may qualify for a conventional loan with competitive interest rates.
  2. Down Payment: While conventional loans often require a down payment, you can choose to put down as little as 3% of the home’s purchase price. However, a higher down payment can help lower your monthly payments and may eliminate the need for private mortgage insurance (PMI).
  3. Financial Stability: Lenders assess your financial stability, including your income, employment history, and debt-to-income ratio, to determine if you can comfortably manage the loan.
  4. Property Type: Conventional loans are suitable for various property types, including single-family homes, townhouses, and condominiums, offering you a wider range of options.

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