Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, USDA Loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Typically, conventional loans have better rates, terms and/or lower fees than other types of loans. However, conventional loans typically require a borrower to have good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 5% to 20%, and reliable monthly income.
Fixed Rate Mortgages: Your rate and payment never change.
Adjustable Rate Mortgages: After an initial fixed-rate period, your interest rate can change at pre-determined time periods.
For Purchase transactions, Conventional Loans require the home-buyer to put down at least 5% - 20% of the purchase price of the home. First-time homebuyers may purchase with just 3% down payment.
Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4 family residences. Conventional loans may finance primary residences, second homes, or investment properties.