A conventional loan is a mortgage that is not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA) and the Department of Veterans Affairs (VA). It is typically fixed in its terms and rate.
Credit Score. Credit score requirements for conventional mortgages vary by lender; however, in most cases the minimum credit score for a conventional mortgage is 620. Some lenders, however, will underwrite mortgages with credit scores as low as 580; it is simply up to each lender as to what score is the cutoff.
Conventional Loan Disadvantages
A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate.
If your score is below 620 to 640: An FHA (Federal Housing Administration) home loan is your best option because most lenders won't approve a conventional loan for borrowers with a credit score below 640. ... However, your mortgage insurance is likely to be higher with an FHA loan.
Here's the head-to-head: Say you want to buy a $180,000 house and you don't have much cash for a down payment. If you go with a 3.5 percent FHA loan, you would need to come up with $6,300. If you select Fannie's 3 percent loan, it's just$5,400