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A conventional loan is a type of mortgage loan that is not insured or guaranteed by the government. Instead, the loan is backed by private lenders, and its insurance is usually paid by the borrower. Conventional loans are more common than any other loan that would be backed by the government. In fact, in 2018, conventional loans were the most popular of loans used amongst Americans. Though conventional loans offer more flexibility, they can be riskier due to the fact they aren’t backed by the government. 

Two Types of Conventional Loans

There are two types of conventional loans, conforming and non – conforming conventional loans. A conforming conventional loan must meet the guidelines set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These are government-sponsored enterprises that purchase mortgages from lenders. A conforming conventional loan has loan limits that need to be met. These limits can change annually depending on housing prices. This brings us to a non-conforming conventional loan. This is a conventional loan that is not purchased by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. This is because it doesn’t meet the loan amount requirements. Instead, non-conforming loans are funded by lenders or private institutions.

Benefits of a Conventional Loan

These loans are so popular because they offer lower interest rates, many different types of down payment options starting at only 3% and offer significantly more flexibility than other loans. With a conventional loan, you will also have reduced private mortgage insurance due to the fact the government isn’t backing your loan. A conventional loan also offers different loan terms for your home starting at 10 years. Having a shorter mortgage term may require a higher monthly payment but would save you thousands of dollars in interest over the years. 


When purchasing your house you will need to do research on what type of loan would best suit you and your particular situation. Depending on the loan, you will also need to determine how much of a down payment and monthly payment you will be able to afford. Another thing to take into consideration is that some neighborhoods and cities have an HOA fee which is a required fee that could hinder you from qualifying for a certain loan depending on the monthly rate. Contact us today with any questions you have regarding your new or existing home loan.