What defines a Conventional loan?

A Conventional loan is characterized as a loan that is not insured or guaranteed by the government. This distinct feature allows for a variety of lending practices and terms that can differ from government-backed loans, such as FHA or VA loans. These loans can be used for a variety of purposes and are typically held in first lien position, meaning they take priority in case of foreclosure over other liens on the property.

In addition to the non-government insured nature, Conventional loans can come with various interest rates and terms, which means they are not limited to just fixed rates or first-time homebuyers. This flexibility is important as it expands the options available to borrowers seeking conventional financing.