A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. Most conventional loans conform to guidelines set by Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy mortgages.
Conventional loans typically require stronger credit and a higher down payment than government-backed loans, though some programs allow as little as three percent down. When the down payment is under 20 percent, borrowers generally must pay private mortgage insurance until they build enough equity.
Loans that fall within the conforming loan limits are called conforming loans, while those that exceed the limit are jumbo loans with stricter requirements. Conventional financing is the most common mortgage type in the United States.