What type of loan is typically used to finance the purchase of a primary residence?

A conventional loan is typically used to finance the purchase of a primary residence because it is a type of mortgage that is not insured or guaranteed by the federal government. This category includes fixed-rate and adjustable-rate loans that adhere to the guidelines set by Fannie Mae and Freddie Mac. These loans generally offer favorable terms, such as lower interest rates and the possibility of putting down a smaller down payment, making them accessible for homebuyers looking to purchase their main home.

In contrast, a home equity loan is designed for homeowners to borrow against the equity in their existing home rather than to finance the purchase of a new residence. A commercial loan is intended for business properties or commercial ventures, not residential homes. Subprime loans cater to borrowers with lower credit scores and may come with higher interest rates and less favorable terms, thus differentiating them from conventional loans' broader acceptance and terms for financing a primary residence.