A conventional loan is any mortgage which is not guaranteed or insured by the federal government.

Conventional loans were the first traditional mortgage loans made by local lenders. The loans were held in the lender's investment portfolio until they were either paid in full or foreclosed upon. Although it enabled the borrower to build a business relationship with the lender, this practice was generally not in the lender's best financial interest. When rates rose, lenders found themselves in the position of receiving below-market interest on their loans, in addition to not being able to recycle the funds to lend to other borrowers.

Although not insured by the federal government, conventional mortgages meet the funding criteria of Fannie Mae and Freddie Mac. About 35-50% of mortgages, depending on market conditions and consumer trends, are conventional mortgages. In other words, Fannie Mae and Freddie Mac guarantee or purchase 35-50% of all mortgages. Conventional mortgages may be fixed-rate or adjustable-rate mortgages.

Most conventional mortgages are packaged into pass-through mortgage-backed securities, which trade in a well-established forward market known as the mortgage TBA (to be announced) market. Many conventional pass-through securities are further securitized into collateralized mortgage obligations (CMOs).

Contact us today and tell us how we can help you with a Conventional Mortgage.