Loans
Conventional Loan
A mortgage that is not insured or guaranteed by a government agency like FHA, VA, or USDA. Conventional loans can be conforming or jumbo and typically require a credit score of 620 or higher. If you put less than 20% down on a conventional loan, you will pay private mortgage insurance (PMI), which can be removed once you build enough equity.
Why It Matters
Conventional Loan is a concept every mortgage borrower should understand before signing loan documents. The terms of your mortgage — including factors like conventional loan — directly determine your monthly payment, total interest paid, and financial flexibility for the next 15-30 years. Taking time to understand these terms puts you in a stronger negotiating position with lenders.
When evaluating loan offers, ask your lender to explain how conventional loan affects your specific loan scenario. Get it in writing on your Loan Estimate form, and compare how different lenders handle conventional loan — the differences can save or cost you thousands over the life of your mortgage.
Real-World Example
For a typical $300,000, 30-year mortgage at 6.5%, understanding conventional loan can help you evaluate whether you're getting the best possible terms. Even small variations in loan terms translate to significant dollar amounts over 360 monthly payments.
Pro Tip
Before your loan closes, make sure you fully understand how conventional loan works in your specific mortgage. Ask your loan officer to walk through it — they're required to explain every term on your Closing Disclosure.