finance

conventional loan

A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. The lender relies on the borrower's credit and the property's value. Conventional loans that meet Fannie Mae and Freddie Mac standards are conforming loans; those exceeding size limits are jumbo loans. When the down payment is less than 20%, the lender typically requires private mortgage insurance.

Exam tip: Conventional means not government-backed. PMI (private) goes with conventional loans; MIP goes with FHA loans.
Example: A buyer puts 10% down on a $400,000 home with a conventional loan of $360,000 and pays PMI until reaching sufficient equity.

1. A conventional loan that exceeds the conforming loan limits set by the FHFA is called a:

Answer & explanation

Answer: B. Loans above the conforming limits cannot be sold to Fannie Mae/Freddie Mac and are non-conforming 'jumbo' loans, usually at higher rates.

Related terms & state variants

conforming loan FHA loan jumbo loan loan-to-value ratio private mortgage insurance

Sources

Source verification pending. Confirm current requirements with your state regulator.

Last verified: 2026-10-23