If you’re looking to get a mortgage to purchase a home, you may be wondering what your options are. One type of loan that you may come across is a conventional loan. In this article, we’ll go over everything you need to know about conventional home loans so you can decide if this is the right type of mortgage for you.
A conventional home loan is a mortgage that is not backed by the government. That means it is not an FHA loan or VA loan. The main difference between a conventional loan and other types of mortgages is that a conventional loan isn’t insured or guaranteed by the government. That means that if you default on your loan, the lender is at risk of losing money.
There are two main types of conventional loans: conforming and non-conforming loans. Conforming loans meet certain guidelines and two government-sponsored enterprises (GSEs) that buy and securitize mortgages. Non-conforming loans don’t meet these guidelines.
Conventional loans can be used to finance a primary residence, a second home, or an investment property. They are available in fixed-rate and adjustable-rate mortgage (ARM) terms. You can get a conforming loan with as little as 3% down or an ARM with as little as 5% down (if you have good credit).