A conventional loan is designed for home buyers and homeowners who have a stable income, good credit, are financially secure and can afford a higher down payment. One of the biggest differences between an FHA or USDA loan is that conventional loans are not backed by the government, allowing the lender to set the terms of the loan and work directly with the home buyer on a perfect mortgage solution.
Advantages of a Conventional Loan
- Offers more flexible terms and restrictions
- Less paperwork
- Wider range of loan options that can be customized to fit your needs
- No private mortgage insurance with a 20% down payment
- Lower interest rates due to good credit and financial stability
- Available for single and multi-family homes, condos and manufactured homes
Conventional loans are available as fixed-rate and adjustable-rate mortgage options. A fixed-rate mortgage means your interest rate will not change over the life of the loan, while an adjustable-rate mortgage will have a fixed rate for a number of years at the start of the loan, but will adjust every year after based on market conditions.
If you want to learn more about a conventional loan, check out this video that compares a conventional vs jumbo loan.