A conventional home loan, simply put, is a home loan that is not backed up nor insured by a government entity. Some of the government entities that back home loans would be the Department of Veteran Affairs (VA loans) or the Federal Finance Housing Administration. For this popular and common option, you would be backed by a credit union, bank, private lender, or mortgage company for your home loan. The terms for these loans can be 15, 20, or any year in between.

What are the benefits of conventional loans? One of the major advantages to having a conventional loan is your down payment can be as low as 3% for first-time buyers. New home buyers have multiple options and advantages when it comes to home purchase financing. Another benefit of a conventional home loan is faster underwriting. Since this option requires less regulation and less paperwork, the process generally moves a bit quicker than most other options. Finally, one of the best advantages is with conventional home loans, you have more options available to you.

Although these loans are definitely preferred for many homebuyers, there are a few drawbacks as well. These types of loans are considered higher risk by the private lenders because they do not have the backing from a government entity. Due to the increased risk, the requirements are a bit tougher as well. Here are some of the general requirements for most conventional loans: