What Is a Conventional Loan?
A conventional loan is a mortgage that isn't insured or guaranteed by a government agency. Most conventional loans are "conforming," meaning they follow guidelines set by Fannie Mae and Freddie Mac and fall within the annual conforming loan limit. Loans above that limit are called "jumbo" loans.
Qualified first-time buyers may put as little as 3% down through programs like Fannie Mae HomeReady® and Freddie Mac Home Possible®. With less than 20% down, private mortgage insurance (PMI) is required — but unlike FHA, PMI can be removed once you reach 20% equity (by request) and is automatically canceled at 22% equity based on the original value, if your payments are current.
Conventional loans are also the go-to option for second homes and investment properties, and they offer fixed-rate terms from 10 to 30 years as well as adjustable-rate (ARM) options.
*3% down programs have eligibility requirements, which may include income limits and homebuyer education.