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What Is a Conventional Loan?

A conventional mortgage loan is one that’s not guaranteed or insured by the federal government. Most conventional mortgage loans are “conforming,” which simply means they meet the requirements to be sold to Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase mortgages from lenders and sell them to investors.

Conventional mortgages can also be non-conforming, which means that they don’t meet Fannie Mae’s or Freddie Mac’s guidelines. One type of non-conforming conventional mortgage is a "Jumbo Loan," which is a mortgage that exceeds conforming loan limits.

There are several different sets of guidelines that fall under the umbrella of “Conventional Loans,” there’s no single set of requirements for borrowers. In general though, Conventional Loans have stricter credit requirements than government-backed loans like FHA loans.

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