Conventional loans

Conventional Loans

Conventional loans, the most popular type of mortgage, are either conforming or non-conforming.

Conforming loans

A conforming loan “conforms” to a set of Federal Housing Finance Agency (FHFA) standards, including guidelines around credit, debt and loan size. When a conventional loan meets these standards, it’s eligible to be purchased by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that back much of the mortgage market.

Non-conforming loans

These loans do not meet one or more of the FHFA’s standards. One of the most common types of non-conforming loan is a jumbo loan, a mortgage in an amount that exceeds the conforming loan limit. Non-conforming loans can’t be purchased by the GSEs, so they’re considered a riskier prospect for lenders.

If you have a strong credit score and can afford to make a sizable down payment, a conventional mortgage is the best pick. The 30-year, fixed-rate option is the most popular choice for homebuyers.

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