Convential home loans are often misunderstood, most notably in regard to down payment requirements. The fact is you don't need 20% down to obtain conventional financing.

Sometimes referred to as a conforming loans, conventional mortgages must "conform" to underwriting standards that are more rigid than their government program counterparts.

While conventional loans come with a higher qualification bar, they offer homeowners many great benefits.

Down Payment Options

Perhaps the biggest misunderstanding about conventional home loans surrounds the down payment. The fact is, you DO NOT need a 20% down payment for a conventional mortgage.

Can you make a 20% down payment if you want? Sure, but conventional home loan down payment options actually start as low as 3% or 5%.

Down Payment Source

Another misconception about conventional mortgages is that the applicable down payment must come from your bank account.

However, your down payment can actually come from a gift by a family member, your retirement account(s), and funds secured by an asset (like an equity loan on property or a financial asset).

Faster Loan Processing

You may or may not think about processing speed while you’re dreaming of your new home, but once in the process of closing your home it will most definitely be important to you.

Because conventional home loans are not part of government program, they come with less paperwork hurdles and can closed much quicker in most cases.

Less Mortgage Insurance

Putting 20% down on a conventional home loan will allow you to avoid mortgage insurance.

However, as with so many home buyers, putting 20% down on a home may not be a possibility. Fortunately, the smaller down payment conventional mortgage options typically require less monthly mortgage insurance than government programs like FHA.