A conventional mortgage loan refers to a loan that is not guaranteed or insured by the government. Sometimes referred to as a conforming loan, these loans are fixed rate or adjustable loans that underwritten by Fannie Mae and Freddie Mac guidelines.
Like FHA loans, Conventional loan programs can also be beneficial to those buyers with less available cash. The rates on Conventional loans are generally market rates, while down payment requirements are lower than for FHA loans in certain circumstances.
Some of the other benefits of Conventional financing :
- Only a 3 percent down payment is required.
- Up to 3 percent closing costs and prepaid items can be financed.
- Lower monthly mortgage insurance premiums, single premium options and, under certain conditions, automatic cancellation of the premium.
- In certain circumstances, flexible underwriting criteria than government loans.