What is a Conventional Loan

A mortgage not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA) and the Department of Veterans (VA), is known as a conventional loan. Conventional loans, typically fixed in terms and rate, maintain their reputation of being a safe type of loan and should be considered by borrowers with good or excellent credit. Conventional mortgages follow conservative guidelines for credit score, minimum down payments, and debt-to-income ratios.

Two Primary Categories of Conventional Mortgages

Most homeowners choose a conventional mortgage because it offers the best interest rates and loan terms, resulting in a lower monthly payment. Choosing a fixed-rate loan over an adjustable-rate mortgage will also make it easier to budget by avoiding changing interest rates.

Conventional loans are often interchangeable with “conforming loans” because they conform to the standards set by federal controlled agencies, Fannie Mae and Freddie Mac.


Conforming: Conforming mortgages follow guidelines set forth by Freddie Mac and Fannie Mae.


Non-conforming: These types of mortgages include jumbo loans, which exceed loan limits imposed by government backed agencies like FHA (Federal Housing Administration), or niche and unusual riskier products that are less common these days, like subprime loans.

FHA vs. Conventional Loan:
Choosing the Right Mortgage for You

If you are a first time home buyer or looking to refinance, you may find yourself wondering which type of loan to get. Different situations do require different types of loans, so it’s important to understand the differences between an FHA vs Conventional loan.

FHA vs. Conventional Loans
FHA Conventional
Credit Score 620+ 660+
Down Payment 3.5% 3%
$8,750 on a $250,000 home $7,500 on a $250,000 home
Mortgage Insurance Not Cancelable Cancelable when home reaches 20% equity