What is a Conventional Loan?

When buying a home, it's important to be aware of the different types of home loans available for you. Today, we're going to break down conventional loans, the qualifications to get approved, and the benefits of using this type of loan to buy your home!

What is a conventional loan?

A conventional loan is any type of home buyer loan that is not offered or secured by a government entity like an FHA or VA loan. It is available through a private lender such as banks, credit unions, mortgage companies) or the two government-sponsored enterprises.

Conventional loans are definitely another great option to get a loan. Most of the conventional loans that we have worked with in the past have been with investors, which usually runs with a 20% down payment. Now, if you're looking to do a conventional loan and you're going to actually take possession of the property, you're looking at anywhere between 5% to 10% down (generally under 20%). There's a myth out there that if you're going conventional, you absolutely have to pay 20%, but that's not the case. You can go as low as 5% on a conventional loan.

But why a conventional loan?

With this type of loan, the primary mortgage insurance or mortgage insurance premium drops off once you pay off at least 20% of the original cost of the property. It doesn't go off the life of the loan, which is another added benefit to using a conventional loan. Another great thing about conventional loans is that it's not as restricted when it comes to repairs on the property.

Credit Score Requirements

Typically you have to have a higher credit score than you would need for a VA or FHA. The requirement is typically a score of 640 and above. Definitely do your research and speak with your lender about the requirement for your area. The credit score brackets go up and down. The government is doing a lot of new things with loans right now as far as the packages that are out. So, definitely do your research!

If you're interested in learning more the different loan types, be sure to subscribe to our YouTube channel or follow our podcast on Spotify, iTunes, or Google Play Music so you can get notified about more information like this!