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What is a Conventional loan?

Conventional loans are any type of creditor agreements that are not financed by the Veterans Administration (VA), or supported by the Federal Housing Administration (FHA). In general, all conventional loans are protected by government sponsored entities such as Fannie Mae (FNMA) and Freddie Mac (FHLMC).

There are two different types of Conventional loans; Conforming and Non-Conforming loans. Conforming loans have to meet the guidelines set by Fannie Mae and Freddie Mac. Any loan which does not meet guidelines is a non-conforming loan.


Conventional loans offer lower fees, as these are typically set by lenders. You will also find lower interest rates with this program, as conventional borrowers must meet higher credit score requirements. Borrowers will choose between a fixed-rate mortgage, which locks the rate in for the life of the loan, or an adjustable-rate mortgage, which secures a lower rate for a set term, at which point the rate will adjust to current market conditions and terms of the loan.

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