A conventional loan is a type of mortgage that is not insured or guaranteed by the federal government. This means that the lender assumes the risk of the loan and may have stricter credit and income requirements compared to government-backed loans such as FHA, VA, or USDA loans.

Here are some key features of conventional loans:

Loan limits: Conventional loans have loan limits that are set annually by Fannie Mae and Freddie Mac. In 2022, the loan limit for a single-family home is $647,200 in most areas of the United States. However, in certain high-cost areas, the limit may be higher.

Down payment: Conventional loans typically require a down payment of at least 3% to 5% of the purchase price, although some lenders may require more. If you put down less than 20% of the purchase price, you may also have to pay private mortgage insurance (PMI).

Credit score: Conventional loans generally require a higher credit score than government-backed loans. Most lenders prefer borrowers to have a credit score of at least 620, although some may require a score of 680 or higher.

Interest rates: Conventional loans may have either a fixed or adjustable interest rate. The interest rate will depend on a variety of factors, including the borrower’s credit score, loan-to-value ratio, and loan amount.

Repayment terms: Conventional loans are typically offered with repayment terms of 15, 20, or 30 years. Shorter-term loans may have lower interest rates but higher monthly payments, while longer-term loans may have higher interest rates but lower monthly payments.