What is a Conventional Loan?

A conventional loan is a mortgage loan offered by private lenders, such as banks, credit unions, and mortgage companies. Unlike government-backed loans, conventional loans are not insured or guaranteed by the government. These loans provide borrowers with flexibility and options for financing their home purchase. Conventional loans offer various features and benefits. Borrowers have the freedom to choose their down payment amount, with options ranging from as low as 3% to the recommended 20% to avoid private mortgage insurance (PMI).

Key Features

Down Payment Flexibility: Conventional loans offer a range of down payment options, allowing borrowers to choose the amount that works best for their financial situation. While a down payment of 20% or more is often recommended to avoid private mortgage insurance (PMI), borrowers can also opt for lower down payment options, such as 5% or even 3% in some cases.
No PMI with 20% Down: If borrowers can provide a down payment of 20% or more, they can avoid the need for private mortgage insurance. This can save them from paying an additional monthly premium and reduce their overall housing costs.
Competitive Interest Rates: Conventional loans typically offer competitive interest rates based on factors such as the borrower's credit score, loan term, and market conditions. Borrowers with excellent credit scores may have access to the best interest rates available.
Flexible Loan Terms: Conventional loans provide flexibility in choosing the loan term that suits the borrower's needs. Borrowers can opt for shorter terms, such as 15 or 20 years, to pay off their mortgage faster or choose longer terms, such as 30 years, to lower their monthly payments.
Use for Various Property Types: Conventional loans can be used to finance different types of properties, including primary residences, second homes, and investment properties. This versatility allows borrowers to meet their specific homeownership goals.
Higher Loan Limits: Conventional loans typically have higher loan limits compared to government-backed loan programs. This can be advantageous for borrowers looking to purchase more expensive properties.

What is a Conventional Loan?

Key Features

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