Conventional Mortgages

What is it?

When people talk about their mortgage loan they're typically talking about a conventional mortgage. This term simply refers to any loan that's not insured or underwritten by the federal government, like a Federal Housing Administration loan (FHA) or a VA loan. You can work with just about any lender to get this type of mortgage and you can choose between a fixed-rate conventional mortgage or an adjustable-rate mortgage.

Advantages of a conventional mortgage:

  • They don't require private mortgage insurance if you're able to put 20 percent down. 
  • Since you're usually required to pay a higher down payment than you would for an FHA loan, you'll build equity faster. 
  • Conventional mortgages are fairly predictable and stable throughout their term, so it's easier to plan for economically. 
  • You can typically get a 15-year mortgage or a 30-year mortgage. 

Disadvantages of a conventional mortgage

  • Since the loan puts the risk on the lender rather than the government, you'll need to meet stricter requirements than you would for a FHA or VA loan. 
  • If you're a first-time home buyer it can be harder to qualify for this type of loan than something like an FHA loan. 
  • You’ll need excellent credit to qualify for the best rates, as well as a consistent employment history, and reasonable debt to income ratio.
  • Many lenders require higher down payments for conventional loans than they do for government-backed loans.
  • You may have to delay buying your first home if you're not able to meet your lender's down payment and credit score requirements. 

Is it right for you?

Conventional mortgages are great for people who: 

  • have good credit and a low debt to income ratio
  • can put 20 percent down 
  • don't qualify for more desirable government loans, like a VA loan

Ready to plan for a conventional mortgage? Check out the estimated mortgage rates and then compare mortgage terms with our 15-year vs. 30-year calculator