A conventional home loan refers to a mortgage loan that isn’t backed or insured by a government agency. Instead, these loans are serviced by private mortgage lenders. There are many types of conventional loans, and they come with plenty of benefits for buyers looking to finance the purchase of their new property.
What is a Conventional Home Loan?
A conventional loan allows borrowers with good credit and a relatively low debt-to-income (DTI) ratio to qualify for a mortgage—they are the most common types of home loans in the country.
Conventional loans are classified into one of two categories: conforming or non-conforming loans. This designates whether the loan terms conform to the guidelines set by the corporations known commonly as Fannie Mae and Freddie Mac. Non-conforming loans generally refer to jumbo loans and other higher-risk applications.
Conventional mortgages are backed by financial institutions such as banks and credit unions. Without government insurance, conventional mortgages pose more risks to lenders. As a result, they tend to have stricter approval requirements. However, there are more advantages and, often, additional flexibility offered to those who qualify and opt for a conventional home loan.
Conventional Home Loan Program Benefits
Available anywhere in the country
620 minimum credit score
No maximum income limits
Potential qualification for down payment assistance
Down payment options from 3%-20% or more
Option to opt-out of private mortgage insurance once 20% equity paid off
Conventional Home Loan FAQs
What is the difference between an FHA and a conventional loan?
Federal Housing Administration/FHA loans are backed by the US government and are generally utilized by home buyers with lower credit scores and higher amounts of debt. Also, while conventional loans can be used to finance many types of property, you can only take out an FHA loan to finance your primary residence.
What are conventional loan interest rates right now?
Conventional loan interest rates fluctuate rapidly, sometimes even multiple times per day. While some mortgage loan calculator websites try to estimate interest rates, the most accurate way to find the answer is to apply for a loan or talk to a qualified mortgage professional.
Can I have more than one conventional loan at one time?
Yes, qualified applicants can have up to ten conventional loans at one time—if they can afford them, of course. However, many real estate investors tend to choose alternative loan options when purchasing multiple properties, such as a blanket loan, portfolio loan, or the Fannie Mae/Freddie Mac investment programs.
Learn More About Mortgage Loans
At the Mortgage Minds Group, we are committed to helping simplify the mortgage process. We believe that starts with education and ends with you in the home of your dreams.
Check out our learning resources, start the loan application qualification process, or reach out with any questions. We’re here to empower your path to homeownership.
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