Conventional Loans

What is a Conventional Loan?

A conventional mortgage is a type of home loan that is not insured or guaranteed by the government. This means that the lender who issues the loan takes on more risk if you are unable to make your payments. For this reason, conventional mortgages tend to have slightly stricter eligibility requirements, but are still often times the best solution if you qualify.

Conventional Loans

Benefits of a Conventional Loan

No Mortgage Insurance under 80% Loan-to-Value (LTV)

One of the benefits of a conventional mortgage is that you won’t be required to pay for private mortgage insurance (PMI) if you make a down payment of at least 20%. PMI is insurance that protects the lender in the event that you default on your loan.


Less Strict Housing Requirements

Because conventional loans are not backed by the government, there are fewer restrictions when it comes to the types of homes that you can purchase.

Drawbacks of a Conventional Loan

Higher Interest Rates

One of the drawbacks of a conventional mortgage loan is that you will typically be charged a higher interest rate than you would with a government-backed loan. This is because mortgage lenders perceive conventional loans to be riskier.


Stricter Credit Requirements

Another drawback is that you may need strong credit in order to qualify for a conventional mortgage loan. Lenders will look at your credit history and score to determine whether you’re a good candidate for a loan.

How to Qualify for a Conventional Loan

There are a few things that you can do to improve your chances of qualifying for a conventional mortgage loan.


  • Have the funds available to close. Having the sufficient funds to cover not only your down payment, but closing costs, and even having a healthy amount left over, will help your chances of getting approved significantly.


  • Maintain a good credit score. Be sure to pay your bills on time and keep your debt levels low. A credit score of 640 or above is recommended, but is not required.


  • Have a stable source of income. There are some requirements for what is considered usable income, so make sure to ask your mortgage broker what you will need to meet these requirements.


If you want to speak to a mortgage broker today, call 706-250-2006, or click here to set an appointment.

Share by: