Conventional Mortgage – What Is A Conventional Mortgage?

A conventional mortgage can be thought of in a couple of different ways. First, conventional mortgages are mortgages offered by Fannie Mae and Freddie Mac versus FHA, VA and the USDA. Second, conventional mortgages in general have fixed interest rates.

Typically, conventional mortgages are capped at a loan amount based on the county or city where you are getting the mortgage. If you want a mortgage amount from Fannie Mae or Freddie Mac above the conventional mortgage cap then you will need to get a jumbo loan. Jumbo loans are still offered through Fannie Mae and Freddie Mac, but they are treated with different underwriting guidelines than conventional mortgages.

Conventional mortgages also require in most cases at least 5% down payment whereas USDA loans and VA loans do not require any down payment and FHA loans require only 3.5%.

You will also be required to pay PMI if you get a conventional mortgage and put less than 20% down when you buy a house. PMI stands for Private Mortgage Insurance and in short, PMI protects your mortgage lender against a complete loss of money if you default on your mortgage payments.