Conventional Home Loan | Accurate Mortgage

conventional loan

A conventional home loan is a mortgage loan offered by non-government sponsored lenders.

These loan types include:

  • Fixed Rate Loans
  • Adjustable Rate Loans (ARMs)
  • Combination (Hybrid) Loans
  • Balloon Mortgages and Pledge Asset Loans
  • Jumbo / Construction Loans
  • Reverse Mortgage

A conventional loan is a lender agreement that’s not guaranteed or insured by the federal government under the Veterans Administration (VA) or the Federal Housing Administration (FHA), or the Rural Housing Service (RHS) of the U.S. Department of Agriculture. A conventional loan can, however, follow the guidelines of government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac. Both Fannie Mae and Freddie Mac are stockholder-owned corporations and are not part of the federal government.

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At one point in our history, conventional loans were the only mortgage loans available and they were all made by local lenders such as banks, savings and loans, and credit unions. They kept and serviced these loans in their own portfolio until they were either paid in full or foreclosed on.

In the late 1930′s, a secondary market was created which allowed these local lenders to sell their loans, getting the full payment much more quickly. Then the organizations that purchased the loans owned the agreement and collected payments from the borrower. Today it is very common for lenders to sell their loans to the secondary market.

Conventional loans may be “conforming” and “non-conforming”. Conforming loans follow the terms and conditions set by Fannie Mae and Freddie Mac. Nonconforming loans don’t meet Fannie Mae or Freddie Mac qualifications, but are also considered conventional.