When ever someone realizes I know about home loans, I get asked the same questions over and over - 'What is a conventional home loan?', 'What's the difference?' 'What is a conventional home loan good for? Is it better?'. Clearly, the government isn't doing enough to try to educate its masses on what loans are!

Therefore, when it comes to what is a conventional home loan, it is important to know what it is and understand the way it works.

So, What is a Conventional Home Loan?

Many loans are really complicated so you should not feel odd if you are not sure what you are dealing with. You won't have to ask what a conventional home loan is again and should learn to be patient.

Basically, a conventional home loan is any sort of loan or lender agreement that's not backed fully by the VA (Veterans Administration), or fully protected by the FHA (The Federal Housing Administration). But that's about where the basics end!

If you are still not sure then don't worry because we are still going to go into a conventional home loan a bit more here.

There are many kinds of conventional home loans and the terms are really broad. This will cover a lot.

For instance: Fixed Rate Mortgage (FRM)

This fixed rate conventional home loan is a very common one and the borrower will have a locked in interest rate for the life of the loan.

This means that the borrower will pay on the principle and the interest until it's paid off. Your interest rate will never go up or down.

Still asking 'what is a conventional home loan', or just haven't answered your questions? There's more!

Conventional home loan type Two: The conforming home loan

This is where the borrower, and the lender, both agree to comply with the rules set out by a federally run organization - Fannie Mae or Freddie Mac. These loans aren't approved, or denied, by either organization - they're simply there.

It benefits the lender most of all to have this, because the lender can then sell your loan - yes, I said sell! - to one or the other, and receive the funds that you would normally pay them faster.

There are other types of loans known as: Jumbo Home Loans

Jumbo home loans are simple - these are loans that are so large, they fall out of the 'purchase limits' set by Fannie Mae or Freddie Mac. They normally have higher interest rates, and come from a private investor.

The Bottom Line

I hope that you get an understanding of the basics and you will not be wondering what a conventional home loan is anymore.