A Conventional loan is a home loan program that is not backed by a government agency, but has many of the benefits that government loans have to offer and, more. Conventional home loans come in several different varieties; whether you are a first-time homebuyer, looking for an investment property, or wanting to refinance your current home, there is a convenient option for you. Below, we’ll go through some of the different types of conventional loans along with the benefits they have to offer, and what to expect for a down payment.
A conventional mortgage or conventional loan is any type of home buyer’s loan that is not offered or secured by a government entity. Instead, conventional mortgages are available through private lenders, such as banks, credit unions, and mortgage companies. However, some conventional mortgages can be guaranteed by two government-sponsored enterprises; the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
- A conventional mortgage or conventional loan is a home buyer’s loan that is not offered or secured by a government entity.
- It is available through or guaranteed by a private lender or the two government-sponsored enterprises—Fannie Mae and Freddie Mac.
- Potential borrowers need to complete an official mortgage application, supply required documents, credit history, and current credit score.
- Conventional loan interest rates tend to be higher than those of government-backed mortgages, such as FHA loans.
Conventional mortgages fall into two categories: “conforming” and “nonconforming” loans.
Conforming loans follow the guidelines set by Fannie Mae and Freddie Mac, two government-sponsored enterprises that provide money for the U.S. housing market. The best-known rule has to do with the size of the loan. In 2022, the conforming loan limit for single-family homes in most of the continental U.S. is $647,200. Higher-cost areas, such as Hawaii and Alaska, have higher limits up to $970,800 for single-family homes.