A conventional loan is a mortgage that is not backed by a government agency. Many lenders offer “conforming loans”, a type of conventional loan, which conform to the guidelines set by Fannie Mae and Freddie Mac. These two government-sponsored enterprises then buy the mortgages from lenders, thus reducing the risk to the lender and creating liquidity for more loans. Some lenders also offer “non-conforming” conventional loans. These include jumbo mortgages and other loans that may have unusual or riskier characteristics.
Benefits of Conventional Loans
- Loan processing may be faster because you do not have to wait on additional government requirements.
- Down payments as low as 3% for first time home buyers. No mortgage insurance required for down payments 20% or higher.
- Borrowers with high credit scores and a good down payment will benefit most from conventional loans. AmeriSave offers competitively low conventional mortgage rates.
- Some government loans come with additional fees or mortgage insurance requirements that conventional loans do not have. Private lenders set their own fees for conventional loans. For example, AmeriSave has no loan origination fee options. Read more about government programs before applying.
- Higher maximum loan limits.
Conventional Loan Requirements
Approval criteria varies from lender to lender. Some of AmeriSave’s general requirements for single unit home purchases include:
- 620 minimum credit score.
- A recent full exterior and interior appraisal.
- Maintain current job throughout the entire loan process and make no major purchases, such as a new vehicle.
- No manufactured or mobile homes allowed.
Do you still have questions about conventional loans? Contact us by phone or chat and an AmeriSave loan originator will be happy to answer your questions. They can help you decide whether a conventional or government loan is best for you. They can also walk you through all of your interest rate, term, and closing cost options.