As soon as you had that first inkling that you wanted to buy a home, you probably started thinking about getting a home loan and when you did, you were probably thinking about a conventional loan. A conventional loan is the standard, traditional mortgage that most people think of when they hear the words “home loan”

What is a conventional loan?

Conventional loans come directly from a lender and are not insured by the government like FHA, VA, and USDA loans are. Because they are not insured, they are a higher risk for the lender, so you have to make a higher down payment (at least 5%). If your down payment is less than 20%, you will also have to pay monthly mortgage insurance premiums.

Interest rates on conventional mortgages can vary quite a bit and are heavily influenced by factors like your credit score and loan-to-value ratio (how much you borrowed compared to how much your property is worth). There are fixed rate and adjustable rate mortgages available on the market, but fixed rates are the norm today.

Why choose a conventional loan?

A conventional loan can offer you the most competitive rates and closing costs. It doesn’t have the upfront mortgage insurance/funding fees that government-insured loans have and it is the go-to loan for people who don’t qualify for those government-insured loans like the VA Loans, USDA Loans, and FHA Loans, all of which have eligibility requirements you might not meet.