A conventional loan is the most popular type of loan and the one that most people think of when beginning their home search. Conventional loans are available for a wide range of buyers; everyone from first time homebuyers to seasoned investors use conventional loans to purchase property.
What is a conventional loan?
A conventional loan is any mortgage loan that is not insured or guaranteed by the government (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs). Conventional loans are broken down into conforming and nonconforming loans, depending on whether or not they conform to guidelines set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), the two government-backed mortgage companies that own many mortgages in the U.S.
First time home buyers can get a conventional loan with only 3% down payment for a primary residence (up to the conforming loan limits in the county they are buying a home in). Private mortgage insurance (PMI) will be required for any purchase when at least 20% down is not provided. The PMI will drop off once the loan has been paid down to 20% of its original value. Repeat home buyers are required to put at least 5% down. Investment properties and second homes require higher down payments.
Our loan experts can help you understand the ins and outs of a conventional loan and determine if it’s the best option for your mortgage needs.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
Lift Home Lending is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.
