Conventional loans
The standard purchase loan, and the one FHA usually gets measured against.
What it is
A conventional loan is a mortgage with no government agency insuring or guaranteeing it. That is the whole definition. It isn't a rate structure, it isn't automatically the cheaper choice, and it isn't one product. Most conventional loans follow rules written by Fannie Mae and Freddie Mac, which is where the qualifying standards come from. Put down less than the lender wants to see and mortgage insurance usually applies, on different terms from FHA's.
Who it's for
- Buyers comparing conventional against FHA on the same house
- Buyers with income, credit and savings ready to be looked at
- Anyone who wants to understand how the mortgage insurance rules differ
The essentials
It is a family, not a product
Fixed rate, adjustable rate, different terms and different mortgage-insurance structures all sit under the word conventional. Ask which one you are actually being quoted.
Mortgage insurance works differently here
Conventional and FHA mortgage insurance aren't the same, and the rules for how long you carry each are different. Ask how each works before comparing the offers.
One number does not decide it
A credit score on its own doesn't decide a conventional loan. Income, debts, savings, the property and the loan structure all move the answer together.
Common questions
- Is conventional always better than FHA?
- No. Each one wins for some files and loses for others. Compare the complete offers for the same buyer and the same house: cash needed at closing, mortgage insurance, terms, and the cost over the years you actually plan to stay.
- Does conventional mean a fixed rate?
- No, and this one trips people up. Conventional describes who stands behind the loan, not how the rate behaves. A conventional loan can be fixed or adjustable. Your note and disclosures tell you which one you have.
Source: Fannie Mae Selling Guide. Current program documents and the borrower's final disclosures control.
This links to the Fannie Mae Selling Guide. It establishes Fannie Mae's rules. Freddie Mac publishes its own guide and the two differ in places, so a file that fits one may not fit the other. Which set applies to you depends on where the loan is sold, which is a question for the conversation rather than for this page.
This page is general information about loan programs, not a commitment to lend or an offer of credit. Program availability, terms, and qualification depend on your situation and are subject to underwriting approval. Tareq Maayta, NMLS #1443073. Loans through Finance USA Corporation, NMLS #135625. Equal Housing Opportunity.