Conventional

A conventional mortgage is a home loan that is not insured or guaranteed by a government agency like the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA). Instead, these loans are backed by private lenders and often follow guidelines set by Fannie Mae and Freddie Mac.

Benefits of a Conventional Mortgage:

  1. Lower Overall Borrowing Costs – While the interest rates depend on creditworthiness, conventional loans often have lower overall costs compared to government-backed loans, especially if you have a strong credit profile.

  2. No Upfront Mortgage Insurance – Unlike FHA loans, conventional loans don’t require upfront mortgage insurance payments. If you put down 20% or more, you can avoid private mortgage insurance (PMI) entirely.

  3. Flexible Loan Terms – Borrowers can choose from a variety of terms, typically ranging from 10 to 30 years, allowing for greater flexibility in budgeting and payments.

  4. More Property Options – Conventional loans can be used for primary residences, second homes, and investment properties, unlike FHA loans, which are limited to primary residences.

  5. Higher Loan Limits – Conventional loans generally have higher loan limits than FHA loans, especially in high-cost areas.

  6. Faster Loan Processing – Since they don’t involve government bureaucracy, conventional mortgages often close more quickly than government-backed loans.

  7. No Loan Limits for Non-Conforming Loans – If you need a loan that exceeds the conforming loan limits, jumbo loans (a type of conventional loan) are available.