A conventional mortgage loan, the most common among homebuyers, is a type of home loan that is not directly insured by any government program. Most of these loans are also known as “conforming” loans, meaning they meet the criteria set by Fannie Mae or Freddie Mac. These two government-sponsored enterprises buy mortgages from lenders and sell them to investors, which allows lenders to replenish their funds and offer more loans to qualified homebuyers.
Conventional mortgages come with various term options. The most common lengths are 15-year and 30-year terms.
Due to the diverse range of guidelines for conventional loans, there isn't a single set of requirements for borrowers. Conditions vary by lender. Generally, though, conventional loans have stricter credit requirements compared to government-backed loans such as those offered by the Federal Housing Administration (FHA).
