Pros
- Lower down payment requirement: For a fixed-rate conforming conventional loan, you’re only required to put 3 percent down. This down payment can come from your savings, a gift, a down payment grant or other sources.
- Cancellable mortgage insurance: Although you’ll pay for mortgage insurance if putting less than 20 percent down, you won’t pay these premiums forever.
- Financing for a range of needs: A conventional loan can be used to pay for a primary residence, investment property or second or vacation home. It can also be for a relatively large loan amount, at a fixed or adjustable rate.
Cons
- Higher credit score requirement: To get a conventional loan, you’ll need a credit score of at least 620.
- Potential for higher interest rates: Your specific rate depends on many factors, but sometimes, conventional loans have slightly higher rates compared to government-backed options.
- Scrutiny of past hardship: If you’ve experienced bankruptcy or foreclosure, you’ll need to wait a longer period before applying for a conventional loan compared to other types of mortgages: two to four years after bankruptcy and three to seven years after foreclosure.
