What Is a Conventional Loan?
If you are thinking about buying a home, then you have a number of conventional loans from which to choose. You have to see which loans provide the best features and benefits. A conventional loan may turn out to be the best loan for you. After reviewing all of the loan types along with your attributes, you will be able to see if you qualify for a conventional loan or some other type of loan.
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Definition
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A conventional loan is a loan that is not guaranteed or insured by any type of government program. Veterans Administration (VA) loans and Federal Housing Administration (FHA) loans are loans guaranteed by or insured by the government.
Conforming/Nonconforming
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Other conventional loans are the conforming and nonconforming types. A conforming loan falls within the rules and guidelines that have been set up by Fannie Mae and Freddie Mac. Nonconforming loans fall outside of the rules and regulations established by Fannie Mae and Freddie Mac.
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Amount
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The maximum limit for a conforming loan that you can qualify for is $417,000 for a single family unit as of 2009. The loan amount could be more if you are purchasing a two-, three- or four-family unit and you live beyond the borders of the 48 adjoining states.
Interest Rate
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There are many different features of a conventional loan. They can have a fixed or variable rate, and they can even have a balloon payment.
Down Payment
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If you want a conventional loan, chances are you will be required to pay a larger down payment than required by a government insured or guaranteed loan. If your down payment is less than 20 percent you will have to purchase private mortgage insurance (PMI).
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