A conventional mortgage or conventional loan is any type of home buyer’s loan that is not offered or secured by a government entity, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) or the USDA Rural Housing Service, but instead is available through or guaranteed by a private lender (banks, credit unions, mortgage companies), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Conventional loans are often erroneously referred to as conforming mortgages or loans. While there is overlap, the two are distinct categories. A conforming mortgage contains underlying terms and conditions that meet the criteria of Fannie Mae and Freddie Mac. While all conforming loans are conventional, not all conventional loans qualify as conforming. Currently, conventional mortgages represent around two-thirds of the homeowners’ loans issued in the U.S.

Conventional loans’ interest rates tend to be higher than those of government-backed mortgages, such as FHA loans. FHA loans usually mandate that borrowers pay mortgage-insurance premiums which are financed into the loan amount. Conventional loans do not finance additional money into the loan amount.

People with established credit, higher scored credit reports, and who are on a solid financial footing usually qualify for conventional mortgages. More specifically, the ideal candidate should have: