What is Conventional financing?

Posted July 10, 2023

Conventional financing refers to a type of mortgage or loan that is not insured or guaranteed by a government agency. It is often contrasted with government-backed loans, such as those offered by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA).

In conventional financing, the lender assumes the risk of providing the loan without any government backing. This means that if the borrower defaults on the loan, the lender may suffer a financial loss. As a result, conventional loans typically have stricter requirements and higher down payment amounts compared to government-backed loans.

Conventional financing is commonly used for home purchases, refinancing existing mortgages, or other personal or business purposes. It is important to note that the specific terms and requirements of conventional loans can vary between lenders, so it's advisable to consult with multiple lenders to compare rates, terms, and conditions before making a decision.