Conventional | L3 Home Lending

Conventional Loans

Lower rates with more flexibility.

A conventional loan refers to any loan that is not insured or guaranteed by the federal government, as opposed to government-insured home loans including FHA loans, VA loans, and USDA loans. Conventional mortgage loans (conforming or non-conforming) typically have a slightly higher down payment requirement than government loans; however, the Conventional loan option normally provides more flexibility and fewer restrictions.

The Benefits

Lower interest rates for borrowers with good or great credit.
Flexible mortgage insurance options, if applicable.
Fewer penalties and fees.
Flexible loan terms.
Down payments range from 3% to 20%.

There are conventional loan programs that allow for a down payment as little as 3%, so if you qualify for these programs, then yes! In fact, one of the biggest home-buying myths out there is that you need a 20% down payment to buy a home; you absolutely don’t.

Take note, however, that if your down payment is less than 20%, a private mortgage insurance (PMI) payment will be added to your monthly mortgage payment, until you have paid off 20% of the mortgage amount.

It depends on your unique financial situation and goals when buying a home. One loan type is not necessarily “better” than another; it’s really more about what loan type fits your current situation and needs. If you have relatively good credit, stable income and a little bit more saved for a down payment, a conventional mortgage loan might be the right fit for you.

If you are an active U.S. service member, veteran or surviving spouse (where a VA loan might be advantageous); or unless you are specifically looking for a home in a more rural setting (where a USDA loan might be advantageous). But as always, your L3 Home Lending loan officer will be able to go through all this with you and help you decide which type of loan fits your specific situation best.

For people with better or more established credit profiles and low levels of debt, it may be advantageous to choose a conventional loan over an FHA loan.

For those who may not have as much established credit, a lower credit score or who may have slightly higher levels of debt, an FHA loan might be the cheaper option over the life of the mortgage loan. This often, but not always, includes first-time homebuyers.