How Do Conventional Loans Work?
A conventional loan is a type of mortgage that allows you to buy a home. The borrower pays interest on the loan and has the option of making monthly payments or paying off the entire loan at once. What is a conventional loan? A conventional loan is a type of mortgage loan that is not insured or guaranteed by the government. Conventional loans are typically available through banks, credit unions, and private lenders. Conventional loans may be either fixed-rate or adjustable-rate. Fixed-rate loans have an interest rate that remains the same for the life of the loan, while adjustable-rate loans have an interest rate that can change over time. Conventional loans typically require a down payment of 20% of the home's purchase price. However, it is possible to put less than 20% down, though you will likely be required to pay private mortgage insurance (PMI) if you do so. The exact terms of a conventional loan will vary depending on the lender, but most conventional loans will have a repa...