The primary difference between a conventional loan and other products is a conventional loan is not made by a government entity or insured by a government entity. It’s commonly referred to as a non-GSE loan. (A non-government sponsored entity). Government type loans are FHA and VA loans. An FHA loan is insured by the government and a VA loan is backed by the government. Down payment requirements are also different. A minimum down payment for an FHA loan is 3.5%. for a VA loan, the minimum down payment is zero.
Amortized Conventional Loans
As a home buyer, you may take out an amortized conventional loan with two important factors in mind; the term of the loan and the LTV, loan-to-value ratio:
- 95% LTV with a 30 year term
- 90% LTV with a 30 year term
- 85%LTV with a 30 year term
- 80% LTV with a 30 year term
The LTV can be lower than 80% and can be structured with whatever is comfortable for you as a borrower. If however, the LTV is higher than 80% you will be required to pay for private mortgage insurance.