A conventional loan is the most standard and widely available type of mortgage that doesn’t come with government backing or special eligibility requirements.

A conventional loan offers flexibility and is widely used for buying various types of properties, including primary residences, second homes, and investment properties.

What is a Conventional Loan?

A conventional loan is a mortgage loan that’s not backed by a government agency. These loans come in all shapes and sizes, and while they don’t provide some of the benefits as FHA, VA and USDA loans, conventional loans remain the most common type of mortgage loan.

Conventional loans are originated, backed and serviced by private mortgage lenders like banks, credit unions and other financial institutions and 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.

How Does a Conventional Loan Work?

From a guideline point of view, all conventional loans are underwritten to either Fannie Mae or Freddie Mac guidelines.  As such, it really doesn’t matter who originates your loan as it will ultimately be sold to Fannie Mae or Freddie Mac.

While the guidelines used to close a conventional loan are all the same, this is not to say that the interest rate offered from lender to lender is the same.  The originating lender will set the interest rate based on their internal profit margin goals and this can vary widely just like any industry.

Who Qualifies for a Conventional Loan?

In order to qualify for a conventional loan, all loan applicants must meet certain loan requirements, including:

• 3-5% down payment
• Good work history
• Verifiable income
• Credit score of 620+

Conventional Loan vs FHA?

Government-insured mortgage loans have special features that can make them a good fit for certain homebuyers. Here’s a quick summary of each option and who might consider it:

• FHA loan is open to applicants with credit scores as low as 500 if you have a 10% down payment, or 580 if you have a 3.5% down payment.
• VA loan doesn’t require a down payment or mortgage insurance, but is designed only for select members of the military community, their spouses and other beneficiaries.
• USDA loans have no down payment requirement and can help low- to moderate-income homebuyers who want to purchase a home in an eligible rural area.

Note that while these loans are insured by various government agencies, it’s private lenders that offer them to borrowers—the same lenders that also offer conventional loans.

Conventional loans are the go-to mortgage option for many people due to their broad accessibility, reasonable down payment requirements, and competitive interest rates, making them a common choice for homeowners and homebuyers.

Ready to get started?

If you are interested in learning more about our Conventional loans, we are here to answer all of your questions.  We will walk through the numbers and the process, from application to closing.

Complete our Quote Request below or call us at 404-303-7411 to take the first step.