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. Conventional loans tend to be ideal for borrowers with excellent credit and at least a 5% down payment.
Most Common Types of Conventional Loans
Fixed Rate Mortgages: Your rate and payment never change.
- 30 Year Fixed Loan
- 20 Year Fixed Loan
- 15 Year Fixed Loan
- 10 Year Fixed Loan
- 5 Year Fixed Loan
Adjustable Rate Mortgages: Fixed rate initially, then adjusts either annually or semi-annually.
- 3/1 or 3/6 ARM
Fixed Rate for 3 Years, Adjustable Rate for the remaining 27 years
- 5/1 or 5/6 ARM
Fixed Rate for 5 Years, Adjustable Rate for the remaining 25 years
- 7/1 or 7/6 ARM
Fixed Rate for 7 Years, Adjustable Rate for the remaining 23 years
- 10/1 or 10/6 ARM
Fixed Rate for 10 Years, Adjustable Rate for the remaining 20 years
What Are the Conventional Down Payment Requirements?
For Purchase transactions Conventional Loans require the homebuyer to put down a minimum of 3% of the purchase price of the home.
What Types of Property Are Eligible?
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.