What Is a Conventional Loan?

Conventional mortgages aren't federally guaranteed. Qualifying can be tougher than with government loans, but the options fit a wider range of buyers and properties.

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“Conventional mortgage” or “conventional loan” is a term you're bound to encounter when you're shopping for a mortgage. After all, this common mortgage type is offered by most lenders.

Conventional loans are often the best option for borrowers with strong credit who can contribute a down payment of at least 3%, or perhaps quite a bit more. Find out what conventional means in the mortgage industry, and whether it might be the right type of home loan for you.

A conventional loan is a type of mortgage that isn’t backed by a government agency, such as the Department of Veterans Affairs. Conventional mortgages often meet the down payment and income requirements set by Fannie Mae and Freddie Mac, and conform to the loan limits set by the Federal Housing Finance Administration, or FHFA.

You'll generally need a credit score of at least 620 to qualify for a conventional loan, though a score that's above 740 will help you get the best rate. Depending on your financial status and the amount you're borrowing, you may be able to make a down payment that's as low as 3% with a conventional loan. (Although be aware that a higher down payment may help get you a lower rate.)

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Government-backed loans are insured by federal agencies. This insurance protects the lender if the borrower fails to repay the loan and is meant to encourage lenders to offer mortgages to a wider range of home buyers.

Conventional mortgages are offered by many lenders that also offer government-backed loans. Lenders generally view conventional loans as riskier because they’re not guaranteed by the government, so conventional mortgages tend to have tougher requirements.

Mortgages backed by government agencies offer different qualifications that can make them more attractive to some home buyers.

Conventional loans aren't limited to borrowers based on income, location or military status. Anyone who is able to meet a lender's standards is eligible for a conventional mortgage.


Conventional mortgages fall into two categories: “conforming” and “nonconforming” loans.

Conforming loans follow the guidelines set by , two government-sponsored enterprises that provide money for the U.S. housing market. The best-known rule has to do with the size of the loan. In 2021, the for single-family homes in most of the continental U.S. is $548,250. Higher-cost areas, such as Hawaii and Alaska, have higher limits up to $822,375 for single-family homes.


Many nonconforming loans are, which are for home buyers who need to borrow an amount that's higher than the conforming limit for the area.

Other types of nonconforming loans include those made to borrowers with poor credit, high debt or recent bankruptcy, or on homes with a high (usually up to 90% for a conforming loan).

Lenders typically charge higher rates for jumbos and other nonconforming loans. These loans may carry other fees or insurance requirements due to their riskier nature.


Compared with government-backed loans, qualifying for a conventional mortgage may be tougher, but a conventional loan can be a good option for many home buyers.

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