What is a conventional loan?

A conventional loan is one not guaranteed by the Federal government. Instead, conventional loans are purchased on the secondary market by the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA) or the Government National Mortgage Association (GNMA). FANNIE MAE (FNMA) and FREDDIE MAC (FHLMC), which are quasi-governmental agencies, buy and sell large quantities of mortgages and work with financial institutions to obtain necessary capital Conventional loans follow certain guidelines of government sponsored entities such as Fannie Mae. A conventional loan can be fixed or adjustable.