Conventional Loans

A conventional loan is a mortgage that is not insured or guaranteed by a government agency. However, many conventional loans are conforming loans, meaning they meet the guidelines set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises (GSEs) that purchase and securitize these loans. 

This type of loan may be a good fit if you have strong credit, stable income, and the ability to make a down payment. While a larger down payment can help eliminate private mortgage insurance (PMI), it is not always required—some programs allow as little as 3% down. 

Conventional loans are offered by private lenders, including banks, credit unions, and mortgage companies, rather than government agencies. 

These loans can come with either fixed or adjustable interest rates. A fixed-rate conventional loan offers stability, as the interest rate remains the same throughout the life of the loan, while adjustable-rate mortgages (ARMs) may have lower initial rates that change over time. 

Interest rates for conventional loans are typically: Lower than FHA loans (for borrowers with strong credit) Higher than VA loans, which are backed by the government and offer more favorable terms to eligible veterans Conforming conventional loans must stay within the loan limits established by Fannie Mae and Freddie Mac. Loans that exceed these limits are considered jumbo (non-conforming) loans. In many cases, borrowers may be able to qualify for higher loan amounts with a conventional loan compared to an FHA loan, depending on their financial profile. To apply, borrowers must complete a mortgage application and provide documentation for income, assets, employment, and credit history, allowing the lender to fully assess eligibility.