Conventional Home Loans
Mortgages are defined as either government-backed or conventional.
Government backed loans utilize Government agencies like the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) who insure home loans, which are made by private lenders. The insurance is paid for by fees collected from mortgage borrowers.
Mortgages not guaranteed or insured by these agencies are known as conventional home loans. Conventional loans are held and backed by the mortgage lender.
Conventional Loan Credit Requirements
Having a good credit score is essential to getting a conventional loan. You can expect lenders to require scores anywhere from 620 to over 700. The typical minimum credit score lenders require for conventional mortgages is 620-640.
Conventional Mortgage Benefits
Higher loan amounts (up to $424,100)
Flexible guidelines on the homes condition
NO PMI with a downpayment of 20%
Mortgage insurance is less expensive (0.51% vs 0.85% with FHA)
3% down-payment for conventional 97% LTV loan
Conventional Mortgage Disadvantages
Reserve funds are often required
620 credit score requirement (higher than FHA)
Large down-payment 5%-20% (Unless you qualify for a Conventional 97 loan which requires a 3% down payment)
Higher interest rates
More difficult to qualify for than FHA