When loans are not guaranteed or not coverage protected by the government, they are known as conventional loans. Of course, as the name posits, they are regular and more popular than other types of loans available in the financial institution marketplace.
Their popularity mostly stems from their open-ended and pliable stat, but there is an obvious downside to this flexibility. Anything could go wrong and when this happens with conventional loans, there is no protection from the government. This means that the financial institution could suffer financial losses.
It is difficult to pre-qualify for a conventional loan.
The lender is the one who bears the risk should the loan repayment process go awry in the first month or a few or many months down the line.
Should you default on your conventional loan, the financial institution bears the financial loss but even at that, your property goes on a foreclosure or short sale to cushion the loss.
There are different types of conventional loans and they are:
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Conventional loans, bar the difficulty in qualifying for it on the borrower’s angle and the financial risk involved on the lender’s angle, have their merits. Some of them are listed below: