Conventional loans are mortgages that aren't insured or guaranteed by any agency of the state or federal government. They're generally obtained through private lending institutions, like banks or credit unions. Conventional loans are usually described as either conforming or non-conforming. Conforming conventional loans have terms and conditions that follow the guidelines set by Fannie Mae and Freddie Mac. These two stockholder-owned corporations are not lenders, but they establish the maximum loan amount, borrower credit and income requirements, down payment, and other loan properties that private lenders typically follow, resulting in better rates for buyers. Non-conforming conventional loans, on the other hand, are mortgages that exceed the maximum loan amount established by Fannie Mae and Freddie Mac. Commonly called 'jumbo' loans, these loans are bought and sold on a much smaller scale and often have higher interest rates than conforming loans because the banks set the guidelines, not the government agencies. Jumbo loans, however, allow you to borrow a greater amount of money and let you use more of you monthly income toward your home. Both types of conventional loans typically come in either a fixed-rate or an adjustable rate structure.
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