Conventional Loan
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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
