The conventional home loan, as the name implies, is one of the more common types of mortgages available to home buyers. In the broadest definition, conventional home loans are mortgages that are not insured or otherwise guaranteed by a government entity. The conventional home loan is an umbrella term that encompasses a variety of different mortgage types including both conforming and non-conforming loans — conforming loans are simply those that conform to Freddie Mac and Fannie Mae loan guidelines — as well as other options like jumbo home loans and sub-prime loans.
Conventional home loans are one of the more common types of mortgages because they offer a decent range of flexibility. There are conventional home loan options for those with a smaller down payment, for those with a poor credit score, or for those who are looking to refinance an existing mortgage. Conventional home loans do not include anything that is guaranteed by a government program, so loan options like an FHA home loan or a USDA mortgage are excluded from this list.
Conventional home loans can be the most appealing variety for those who qualify because they tend to offer the best interest rates and loan terms. However, conventional home loans are a bit less flexible on the benefits they provide for unique housing circumstances. If, for example, you are planning to buy a home in a rural area, a USDA home loan may be a better option. Or, if you plan on doing major renovations, a construction loan might be a better option. However, if you have good credit, a good debt to income ratio, stable income, and a decent down payment, a conventional loan may provide you with the best interest rate and term — providing you with the lowest monthly payment possible. Depending on your financial situation, conventional home loans generally provide faster processing as well.
A conventional home loan may be the best option for you, or it may not. The best way to find the right mortgage type for your specific needs and financial situation is to work with a mortgage broker. We work with multiple different mortgage financing lenders so we can explore a range of different options and find you the best rate and terms based on your needs. Contact the Patriot Home Mortgage team to learn more about conventional home loans and see whether this is the best option for you.