Routing # 256078446
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What Is a Conventional Loan?
What you'll learn: Conventional loan definition, benefits, qualifications, and credit score needed.
EXPECTED READ TIME: 3 MINUTES
Updated October 17, 2023
There are a lot of home finance terms out there. And they get thrown around as if they’re super common. VA loans. Jumbo loans. ARMs and FHAs. The list goes on! But for most people, these are words that only come up a few times in a lifetime. Conventional loans are just one example.
A conventional loan is a home finance offering that does not come from a government agency. These loans are secured and offered by private lenders. That makes them different from VA loans and FHA loans, which are backed by the U.S. government and only available through approved lenders.
A conventional loan is exactly what it sounds like—a standard-issue, classic home loan option.
What are the benefits of a conventional loan?
It may seem like a government-backed loan is a better bet for most people, but that’s not necessarily true. Conventional loans come with their own set of advantages:
- Private Mortgage Insurance (PMI) can be avoided with a 20%+ down payment
- PMI can be removed once the equity in your home reaches or exceeds 20%
- Can be used for owner-occupied residences, vacation homes, and investment properties
- Less stringent property, income, and service requirements than VA or FHA loans
Basically, a conventional loan can be a great option for those who are looking for greater flexibility and broader needs. Since FHA loans and VA loans are designed with specific homebuyers in mind, conventional loans may offer a broader choice for all types of homebuying needs.
What’s a good credit score for conventional loans?
A credit score of 620 is considered the minimum for a conventional loan by many lenders; however, in general, a higher credit score may result in a lower interest rate. Product guidelines vary by lender.
And credit scores aren’t the only factor that matters. You’ll want to take your debt-to-income ratio (DTI) into account as well. This means keeping an eye on your monthly expenses in relation to how much you’re bringing in.
Is a conventional loan right for me?
There’s no one-size-fits-all option for home financing—that’s why there are so many different types and terms to deal with. But generally speaking, a conventional loan is a great choice with greater flexibility, competitive rates, and low fees. Ultimately, the loan type you need will depend on your unique situation.
SIMILAR ARTICLES
Do Sellers Prefer Conventional Loans?
Is there a difference between FHA vs. Conventional for sellers? From days to close, credit scores, and appraisal guidelines see what sellers are considering.
Conventional Loan Down Payment
How much down payment do you need for a conventional loan? Get the answer to that and learn more about conventional loans.
VA Loan Compared to a Conventional Loan
Discover what the difference between a VA loan and a conventional loan is. Answer the question of if a VA loan is better than a conventional loan?
What Is a Conforming Loan?
A conforming loan is based on guidelines set by government sponsored entities. It is important to understand what a conforming loan is and its differences from other mortgage loans.
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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