Conventional Financing

A conventional loan is a mortgage loan which is less than or equal to the lending limits and underwriting conditions set by GSE's Fannie Mae or Freddie Mac. These underwriting conditions determine the maximum loan amount a borrower (or borrowers) can borrow, amount of funds they need to bring in as a down payment, minimum credit scores, income criteria, and eligible properties.


Fannie Mae or Freddie Mac may purchase loans from the lender that adhere to their criteria. However, the loan servicing part may remain with the original lender to keep payments simple and easier for the borrower. A larger majority of loans originated in the U.S. fit into the conventional classification. Conventional loan may also be known as "conforming" and traditional jumbo loans.


Fannie Mae and Freddie Mac have loan limits, as of 2017, up to $424,100. This limit is an increase from the old limits of $417,000. During the real estate boom, conforming loan limits moved up farily quick from $227,500 in 1998 up to $417,000 in 2006 (until 2016).

Jumbo loans are amounts above those limits with traditional underwriting guidelines.