The definition of a conventional mortgage is simply any mortgage not backed by the Federal Government.  Whereas FHA loans are insured by the government and VA loans are guaranteed by the government, conventional loans are not. Conventional mortgage loans can either be “conforming” or “nonconforming”.  

A conforming mortgage loan is defined as a loan that meets Fannie Mae’s and Freddie Mac’s lending requirements. It’s important to banks to issue loans that meet these requirements because most mortgages are ultimately sold by the lender to Fannie Mae or Freddie Mac.


Conventional Conforming Mortgage Pros:

  • You no longer have to pay monthly private mortgage insurance once you have 20%+ equity in the home.  (Put 20% down and you can completely avoid this cost.)
  • Depending on your credit, mortgage insurance may be less expensive than FHA mortgage insurance.
  • Down payments as low as 3%.

Conventional Conforming Mortgage Cons:

  • If you have marginal or low credit scores you will not quality.
  • The conforming mortgage is limited to $548,250 in 2021 for single-family homes.

Non – Conforming

Non-conforming loans can come in any shape or size, but a common type of non-conforming loan is a “jumbo mortgage” which is used when the amount of loan is greater than the conforming loan limit of $548,250.

Non-Conforming Mortgage Pros:

  • You can obtain high dollar loans.
  • The loan terms can be flexible

Non-conforming Mortgage Cons:

  • In order to qualify you will need excellent credit.
  • Interest rate will likely be higher

For more information on conventional mortgages, click here.