For people looking to purchase a home, there are three primary types of home financing loans. Two of these loans are VA and FHA loans, backed by the government and only eligible to certain borrowers based on specific criteria. The final type of loan is what is called a "conventional mortgage" and is the most commonly granted kind of home financing available.
Conventional loans are offered by private lenders like banks, credit unions or savings institutions. Since they are not backed by the government they are often simpler and quicker than VA or FHA loans—though they offer higher risk to lenders. To mitigate against risk and to incentivize payment, they often require a higher down payment: typically between 5 percent (the minimum) and 20 percent of the total value of the loan.
Most conventional loans come in terms of 15, 20 or 30 years. While requirements vary from lender to lender, the average minimum credit score required to qualify is 620 — with 740 or above being the score that offers some of the best rates. Lower scores do not rule out eligibility, but often come with higher interest rates.