What Is a Conventional Loan?

A conventional loan is a type of mortgage that is not backed by a government agency. Instead, these loans follow guidelines established by Fannie Mae and Freddie Mac, which purchase and guarantee many conventional mortgages.

These loans are one of the most common financing options for homebuyers and are typically used by borrowers with strong credit profiles and stable income.

How Conventional Loans Work

Conventional loans are issued by private lenders and must meet specific qualification guidelines. These loans can be used for purchasing a home or refinancing an existing mortgage.

Borrowers generally need:

A higher credit score compared to FHA loans
A stable income and employment history
A down payment (often 3%–20%)

The stronger your financial profile, the more favorable your loan terms may be.

Key Benefits of Conventional Loans

Conventional loans offer several advantages:

Competitive interest rates for qualified borrowers
Flexible loan terms (15, 20, or 30 years)
No upfront mortgage insurance fees
Potential to remove PMI once equity is built

These benefits make conventional loans a strong option for borrowers who meet the requirements.

Conventional Loan vs FHA Loan

Compared to FHA loans, conventional loans often require stronger credit but may offer lower long-term costs.

If you are comparing loan types, it may help to review FHA loan programs alongside conventional mortgage options .

fha loan concept. hand holding house model

When a Conventional Loan Makes Sense

A conventional loan may be a good fit if:

You have a strong credit profile
You can afford a higher down payment
You want to avoid long-term mortgage insurance
You are purchasing a primary or investment property

Explore Conventional Loan Options

Conventional loans can be used for both home purchases and refinancing scenarios.

To explore available options, visit conventional loan programs or compare with home purchase loans .

Frequently Asked Questions

What credit score is needed for a conventional loan?

Requirements vary, but conventional loans typically require higher credit scores than FHA loans.

Do conventional loans require mortgage insurance?

PMI may be required with lower down payments, but it can be removed once sufficient equity is built.

Are conventional loans available for investment properties?

Yes. These loans are commonly used for primary, secondary, and investment properties.

Related Terms

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Ace Mortgage Loan Corporation provides quality mortgage services to the people of Broward and Palm Beach Counties. Call us today at (954) 777-4774 to get started!

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Conventional Loan