What is a Conventional Mortgage?
A conventional mortgage is any type of mortgage loan that is not offered or secured by a government entity, like the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) or the USDA Rural Housing Service. This type of mortgage is available through or guaranteed by a private lender (banks, credit unions, mortgage companies) or the two government-sponsored enterprises, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
With recent changes to conventional financing guidelines this mortgage program is a strong competitor to FHA financing. The main difference being that FHA mortgage insurance remains on the loan for the life of the loan, conventional mortgage insurance is cancellable when the loan-to-value reaches 78%.