Conventional Loan Definition
A conventional loan is a mortgage that is offered by private lenders and is not guaranteed or insured by a Government agency. Conventional loans are known as a conforming loan because they meet the criteria set by Fannie Mae and Freddie Mac.
Why Conventional Loans are so Popular
Conventional loans are the most popular type of mortgage used today. A conventional mortgage is a conforming loan because it meets the standards set by Fannie Mae and Freddie Mac.
A conventional loan is not a Government backed mortgage such as FHA, VA, USDA, and FHA 203k Loans. These mortgages are offered by private mortgage lenders and are usually sold to the largest buyer of mortgages, Fannie Mae and Freddie Mac.
The Benefits of a Conventional Mortgage
Some of the main advantages of conventional loans vs Government loans is that mortgage insurance (PMI) is cheaper. PMI is not required if you have at least 20% to put down.
Conventional mortgages are also available for most any type of property. Unlike FHA loans, you can get a conventional loan on a second home or investment property.
The Pros and Cons
Conventional Loan Pros
Conventional Loan Cons