Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, and USDA Loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Typically, conventional loans have better rates, terms and/or lower fees than other types of loans.
However, conventional loans typically require a borrower to have good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 5-20% and reliable monthly income. Conventional loans are ideal for borrowers with excellent credit and at least a 5% down payment.
Most Common Types of
Fixed Rate Mortgages
With fixed rate mortgages, your rate and payment never change.
30 Year Fixed Loan
Benefits: Lowest fixed monthly payments.
20 Year Fixed Loan
Benefits: Low fixed monthly payments.
15 Year Fixed Loan
Benefits: Lower rate than the 15 or 20 Year Fixed; Pay less interest and pay your home off more quickly.
10 Year Fixed Loan
Benefits: Lower rate; Pay off your loan and build equity faster.
5 Year Fixed Loan
Benefits: Lowest rate; Pay off your loan and build equity the fastest.
Adjustable Rate Mortgages
After the initial period your interest rate can change once a year with adjustable rate mortgages.
Fixed Rate for 3 Years, Adjustable Rate for the remaining 27 years.
Fixed Rate for 5 Years, Adjustable Rate for the remaining 25 years.
Fixed Rate for 7 Years, Adjustable Rate for the remaining 23 years.