What is a Conventional Loan?
When it comes to buying a home, most people require a mortgage to finance the purchase. A conventional loan is one type of mortgage that is not guaranteed or insured by the government. Instead, it's issued by a private lender, such as a bank or credit union.
Conventional loans are different from government-backed mortgages, such as FHA, VA, or USDA loans. These types of loans are insured by the government, which means that the government guarantees repayment to the lender in case the borrower defaults on the loan. Conventional loans, on the other hand, are not insured or guaranteed by the government, and are therefore considered more risky for lenders.
One of the advantages of a conventional loan is that it typically offers lower interest rates compared to other types of mortgages. This can result in significant savings over the life of the loan.
To qualify for a conventional loan, you'll need a good credit score and a stable income. The exact requirements can vary depending on the lender and the type of conventional loan you're applying for, but in general, a credit score of 620 or higher is recommended. You may also need to provide a down payment of at least 3% to 20% of the home's purchase price.
One thing to keep in mind is that conventional loans may have stricter requirements than government-backed loans when it comes to things like debt-to-income ratio and credit history. However, if you have good credit and a stable income, a conventional loan can be a great option for financing your home purchase.
Overall, conventional loans offer flexibility, lower interest rates, and can be a great option for those who have good credit and a stable income. If you're considering buying a home, be sure to explore all your mortgage options and choose the one that best fits your needs and financial situation, and if you would like help finding a lender to start the preapproval process, feel free to reach out to anyone on the team.