B2 Funding - Conventional Loans

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Typically there are three ways to finance a home: FHA loans, VA loans and conventional loans. Each subset of loans comes with several options, but none more so than conventional loans. Knowing the ins and outs of the available options with a conventional loan can help home buyers make the best purchasing decision for their budget.

A conventional home loan is a loan to purchase a home that is not guaranteed or insured by the federal government. These type of loans follow certain guidelines of government sponsored entities such as Fannie Mae. A conventional loan can be fixed or adjustable.

Conventional Loan Benefits
The big advantage of conventional loans is that they often do not come with the amount of stipulations that FHA loans do. For example, with FHA loans, if you refinance or sell your house, you will lose all of the money that you saved by going into it in the first place. Through prepayment penalties and other costs, it may actually cost you more. The rules and regulations are far less strict with conventional loans in many cases.

Conventional Loan Drawbacks
There are many things that would qualify as a drawback of a conventional loan. For one thing, it is much more difficult to qualify for a conventional loan. The bank is basing everything on your personal credit and guarantee. With an FHA loan, the government is standing behind the loan, so you are more likely to be approved. With conventional loans, you will be forced to qualify on your own merit.