Conventional loans are any type of creditor agreement not financed by the Veterans Affairs (VA) or Federal Housing Association (FHA). A Conventional loan is always protected by government-sponsored entities such as Fannie Mae (FNMA) and Freddie Mac (FHLMC).
There are two distinct types of Conventional loans – conforming and non-conforming. Conforming loans are required to meet guidelines set by Fannie Mae and Freddie Mac. All other loans that do not meet these requirements are non-conforming loans.
Note: For down payments that are less than 20%, Private Mortgage Insurance (PMI) is required.