What is a Conventional Loan?

A Conventional loan is a mortgage offered by private lenders such as banks, credit unions, and mortgage companies. Unlike government-backed loans like FHA, VA, or USDA loans, conventional loans are not insured or guaranteed by any government agency. This distinction often means that conventional loans come with stricter lending requirements, including higher credit score thresholds and more substantial down payment expectations. Borrowers typically need to demonstrate financial stability and a good credit history to qualify, making these loans particularly suitable for those with strong credit profiles.

Conventional loans can feature either fixed or variable interest rates, offering flexibility to match borrowers’ financial situations and preferences. Fixed-rate loans provide stability with consistent monthly payments over the life of the loan, while variable-rate loans may start with lower rates that can adjust over time. Some conventional loans can also be partially guaranteed by government-sponsored enterprises like Fannie Mae or Freddie Mac, which helps expand access to these loans. Ideal for borrowers looking for customizable terms and competitive rates, conventional loans are a popular choice for home financing.