Conventional loans are any loans that the government does not fund. They are separated between conforming and non-conforming. The conforming loans have terms and conditions, based off Fannie Mae and Freddie Mac that establish: maximum loan amount, borrower’s credit and income requirements, down payment, and suitable properties. Credit scores required are 620 or above and the percent down payment is between 5-20%. Non- conforming do not meet Freddie Mac and Fannie Mae requirements, but have a set of their own. The qualifications for each are higher than what an FHA loan requires.
Pros: Conventional mortgages tend to have fewer hurdles to overcome which decreases the amount of time between closing your loan.
Cons: With conventional mortgages you have origination fees, down payments, mortgage insurance, and other out of pocket fees that you may have to deal with. Another aspect to consider is the high credit score requirement. The average score they look for tends to be 620 or above.
Who they are good for: Conventional loans are ideal for borrowers with excellent credit who can afford a down payment of 5% or more.