What is a conventional loan?
Conventional loans are any loans that are non-government funded, unlike FHA and VA loans. Conventional loans come in two forms: conforming and non-conforming. Conforming conventional loans follow loan limit guidelines, where non-conforming conventional loans offer the option to exceed loan limits enforced by the government and government-backed agencies.
In terms of mortgages, conventional loans offer the best interest rates, meaning they usually result in lower monthly payments. They are usually considered the steadiest, safest type of loan, and allow the borrower to avoid rising mortgage rates.
Who can take advantage of conventional loans?
Conventional loans are great for many home buyers because of their ideal rates, low costs, and added flexibility. When applying for a conventional loan, you must meet 3 initial requirements:
- Be able to make a down payment.
- Meet the minimum FICO credit score (often 620 or above)
- Prove a stable income
Another benefit to taking out a conventional loan is the flexibility they provide for different types of properties. Eligible properties for conventional loans include single-family homes, condominiums, multi-unit properties, and planned unit developments.
So, if you have a decent credit score and available funds to make a down payment on an eligible property, it is likely you qualify for a conventional loan.