Conventional Loans
What is a Conventional Loan?
A conventional loan is a mortgage that is not guaranteed or insured by any government agency. It is typically fixed in its terms and rate. About half of all conventional loans are called “conforming” mortgages because they conform to guidelines established by Fannie Mae and Freddie Mac.
These two government-sponsored enterprises (GSEs) buy mortgages from lenders and sell them to investors. Their purpose is to make mortgages more widely available. All conforming mortgages are also conventional mortgages.
Loans that do not conform to GSE guidelines are referred to as “non-conforming” home loans. Non-conforming loans that are larger than loan limits set by the GSEs are often referred to as “jumbo” mortgages. All non-conforming mortgages are also conventional mortgages.
