A conventional loan is a mortgage that is not insured or guaranteed by a federal government agency, distinguishing it from FHA, VA or USDA loan programs. Most conventional loans originate to meet standards set by Fannie Mae or Freddie Mac, making them eligible for sale on the secondary market.
Conventional financing is among the most common loan types in residential real estate, available for primary residences, second homes and investment properties. Borrower eligibility is based on credit score, debt-to-income ratio, down payment and property type — with private mortgage insurance (PMI) typically required when the down payment falls below 20%.
From a valuation standpoint, conventional loans follow Fannie Mae and Freddie Mac appraisal guidelines, which dictate report form requirements, comparable selection standards and property condition thresholds. Appraisers, loan originators and valuation companies should stay current with agency guideline updates, as changes directly affect how properties are evaluated and whether transactions can move forward as structured.