Conventional Mortgage Loans
A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government and conforms to the loan limits set forth by Freddie Mac and Fannie Mae. You can get a conventional loan at a fixed or adjustable rate.
The term of a conventional loan is usually 15, 20 or 30 years. These mortgages are available to everyone, but borrowers need good credit to qualify. Requirements vary from lender to lender, but 620 is typically the minimum credit score needed to obtain a conventional loan, and 740 is the minimum score you need to get a good rate.
A conventional mortgage also requires a sizable down payment in comparison to other types of mortgage loans. Borrowers can put down as little as 5%, but conventional lenders typically require up to 20% for a down payment, the amount can vary based on the lender as well as the borrower’s credit history.
In addition to the down payment, borrowers are often responsible for origination fees, mortgage insurance and appraisal fees. As such, conventional loans tend to have a higher out-of-pocket cost at closing than other types of mortgage loans.