Key Features of Conventional Loans

1. Down Payment: Conventional loans typically require a down payment of at least 20% of the home’s purchase price. However, some lenders may allow lower down payments, such as 10% or even 5%, but this often requires the borrower to pay for private mortgage insurance (PMI).

2. Credit Score Requirements: Lenders generally have minimum credit score requirements for conventional loans, which can vary depending on the lender and the loan program. A higher credit score can help you qualify for better interest rates and terms.

3. Loan Limits: Conventional loans have loan limits that are set annually by the Federal Housing Finance Agency (FHFA). These limits vary based on the location and the number of units in the property.

4. Interest Rates: Interest rates for conventional loans are determined by the lender and can be fixed or adjustable. Fixed-rate mortgages have an interest rate that remains constant throughout the loan term, while adjustable-rate mortgages (ARMs) have an interest rate that can fluctuate over time.

5. Loan Terms: Conventional loans are typically available with various loan terms, such as 15-year, 20-year, or 30-year terms. The loan term affects the monthly payment amount and the total interest paid over the life of the loan.

Advantages of Conventional Loans

– No upfront mortgage insurance premiums (if you have a 20% down payment)
– Potential for lower interest rates compared to government-backed loans
– More flexible underwriting guidelines for borrowers with strong credit and income profiles
– No ongoing mortgage insurance payments (if you have a 20% down payment)

Conventional loans are a popular choice for many homebuyers, especially those with good credit scores and the ability to make a substantial down payment. It’s essential to carefully evaluate your financial situation and compare different loan options to find the best fit for your homeownership goals.