Conventional loans are a popular financing option for purchasing a home or refinancing an existing mortgage. These loans are offered by private lenders such as banks, credit unions, and mortgage companies, rather than being backed by a government agency. They are typically available with both fixed and variable interest rates and can come in various term lengths, with the most common being 15-year or 30-year terms.
Unlike government-backed loans like FHA, VA, or USDA loans, conventional loans are governed by guidelines set by the two major government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac—but are not insured or guaranteed by any government entity. This makes them a bit more flexible, but also places the responsibility on private lenders to determine eligibility and loan terms.
Key Features of Conventional Loans
Eligibility and Qualification Criteria for Conventional Loans
While conventional loans offer flexibility, they still have certain qualifications borrowers must meet. These include:
Types of Properties Eligible for Conventional Loans
One of the advantages of conventional loans is their flexibility in terms of property types. They can be used to finance:
This makes conventional loans a versatile option for buyers with a wide range of housing needs.
Benefits of Conventional Loans
Competitive Interest Rates: Borrowers with strong credit histories and financial profiles can access competitive interest rates, making conventional loans a cost-effective option for many.