A conventional loan is a mortgage product that is not backed by a government agency. These types of loans normally meet income and down payment requirements that are set by Freddie Mac and Fannie Mae.
Loan Highlights and benefits
A conventional home loan can provide borrowers with flexibility, potentially lower interest rates, and the ability to finance a variety of property types.
- Flexibility: Conventional home loans offer a range of options to borrowers, including fixed-rate and adjustable-rate mortgages, as well as different term lengths. This can allow borrowers to customize their loan to fit their individual needs and financial situation.
- No mortgage insurance required: Borrowers who make a down payment of at least 20% of the home's purchase price are not required to pay for private mortgage insurance (PMI) with a conventional home loan. This can save homeowners thousands of dollars over the life of the loan.
- Potentially lower interest rates: Conventional home loans may offer lower interest rates than other types of loans, such as FHA or VA loans. This can result in lower monthly mortgage payments and long-term savings for homeowners.
- Can be used for a variety of purposes: Conventional home loans can be used to purchase a primary residence, second home, or investment property. They can also be used to refinance an existing mortgage.
- Faster loan processing times: Conventional home loans may have faster loan processing times than other types of loans, such as government-backed loans. This can be particularly beneficial for homebuyers who are looking to close on a home quickly.