Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, USDA Loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Which are only sponsored enterprises. Ideal for great-excellent credit borrowers, conventional loans can have better rates, terms and/or lower fees than other types of loans. However, conventional loans penalize borrowers good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 5-20% and reliable monthly income.
Fixed Rate Mortgages: Your rate and payment never change.
Adjustable Rate Mortgages: After the initial period your interest rate can change once a year.
For Purchase transactions Conventional Loans require the home-buyer to put down at least 5% - 20% of the purchase price of the home. For a Refinance transaction, most lenders require at least 10% equity in the property.
‘HomeReady’ and ‘Home-Possible’ are (FHFA) sponsored Conventional First-Time Home-Buyer programs that offer as little as 1% down loan options. These are intended to give Qualified First-Time buyers an alternative option to FHA programs.
Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4 family residences. A conventional loan can also be used to finance a primary residence, second home and investment property.