Conventional loans used to be the only loans available. They were issued by banks, credit unions and savings and loans. These private lenders kept and serviced these loans in their own portfolio until they were either paid off or foreclosed. In the 1930’s, with the advent of the secondary market, these local lenders could now sell their loans thereby obtaining repayment much faster. The buyer would then own the note and collect the payments. In 2015 it’s quite common for mortgage holders to sell their loans on the secondary market.

There are conforming and non-conforming conventional loans. Conforming loans are underwritten in accordance with the guidelines promulgated by Fannie Mae and Freddie Mac, and have a maximum loan amount of $417,000.
Non-conforming loans don’t follow the guidelines set by Fannie Mae or Freddie Mac, but are still considered conventional. Conventional loans can be fixed rate mortgages, adjustable rate mortgages, or hybrids. Almost any mortgage loan that’s not insured or guaranteed by a government agency is considered a conventional loan.

Conventional loans are available with down payments as low as 3%. If the down payment is less than 20%, please note that private mortgage insurance is required.