What is a "conventional loan"?

A conventional loan is defined as a type of mortgage that is not backed by any government agency. This distinction is significant because it sets conventional loans apart from other types of loans, such as FHA loans or VA loans, which do receive governmental support.

For many borrowers, conventional loans are often more accessible and flexible, as they can come in various terms and conditions, depending on the lender's policies and the borrower's financial profile. They typically require a higher credit score and a larger down payment compared to government-backed loans, but they are commonly sought after for their competitive interest rates and less stringent requirements on mortgage insurance if the down payment is at least 20%.

Understanding the nature of a conventional loan is crucial for borrowers navigating the mortgage landscape, as it influences their choices and what kind of loan terms they might qualify for based on their financial situation.