A conventional mortgage sometimes referred to as a conforming loan, is a loan that is not insured or backed by any government entity. Instead, conventional loans follow guidelines set by Fannie Mae and Freddie Mac (agencies that help standardize mortgage lending in the US). Conventional mortgages range in length, with popular options being 10, 15, or 30 years*. Interest rates for conventional mortgages are competitive and vary based on credit score, loan term, and other factors.
If you have a sizable down payment and good-to-excellent credit, a conventional mortgage may be a good fit for you. You may also want to consider a conventional loan to take advantage of certain benefits the product can offer. For example, there generally isn’t an upfront funding fee. Conventional loans also typically provide some flexibility when it comes to property types and expectations that government-backed loan products don’t.
Conventional loans require a monthly mortgage insurance fee, or private mortgage insurance (PMI), when a homeowner puts down less than 20%*. Private mortgage insurance rates vary depending on factors like credit score and down payment. The premium for your mortgage insurance will be added to your monthly mortgage payments. The private mortgage insurance doesn’t cover the homeowner, rather it serves as protection for the lender to cover losses should you default on your home loan.