A conventional loan is a home loan that is not guaranteed or insured by the federal government and conforms to the loan limits set forth by Fannie Mae and Freddie Mac. Conventional loans can be taken out for as short or long a term as you wish, and are available in fixed and adjustable-rate products.
Conventional loans are offered privately and then sold to Fannie Mae/Freddie Mac. Because they are not guaranteed by the government if the buyer defaults, they are a higher risk for lenders. It is for this reason that conventional loans require a higher down payment. Conventional loans can be obtained with as little as 3% down for qualified buyers. However, buyers with less than 20% equity must carry PMI - Private Mortgage Insurance.
In most areas the conventional loan limit is $484,350 although there are certain high-cost areas in the US where the limit is increased to $726,525. Loans above either of those two amounts will be considered Jumbo loans.
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