Conventional Home Loans vs. Government Loans


Conventional Home Loans

Mortgage Consumers are often confused as to whether they need to apply for a Conventional Loan or a Government Loan such as an FHA, VA or RHS loan.  The best answer is first to talk to a Loan Officer as there are many benefits and downsides to both. Choosing the right loan type depends on each particular borrower’s needs.  Conventional loans are usually associated with Fannie Mae and Freddie Mac, two government-sponsored agencies.  Government loans include The Federal Housing Administration (FHA), Veteran’s Administration (VA) and Rural Development (USDA).  None of these agencies lend money or set interest rates. They insure the loans or provide support for these loans on the lender's behalf.  The general idea behind these agencies is that the government should encourage homeownership which is good for the economy and homeowners themselves.

Underwriting rules for each program can change, but in general FHA lending guidelines are less strict than Fannie Mae or Freddie Mac guidelines.  To better understand the current rules and regulations, Mortgage Consumers should contact their Loan Officer and should shop around as loan offers often differ from one lender to another.



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