A conventional mortgage refers to a home loan that is not insured or guaranteed by a government agency such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). Instead, conventional mortgages are backed by private lenders and follow guidelines set by two government-sponsored enterprises, Fannie Mae and Freddie Mac.

Here are key features of conventional mortgages:

1. **Down Payment:** Conventional mortgages typically require a higher down payment compared to government-backed loans. The down payment requirement may vary, but it is often around 5% to 20% of the home’s purchase price. A larger down payment may be required for borrowers with lower credit scores.

2. **Credit Score:** Borrowers applying for conventional mortgages usually need a relatively higher credit score compared to government-backed loans. A good credit history is important for obtaining favorable terms, including a lower interest rate.

3. **Loan Limits:** Conventional mortgages are subject to loan limits set by Fannie Mae and Freddie Mac. These limits vary by location and are adjusted annually. Borrowers seeking larger loan amounts may need to explore jumbo loans, which are not conforming to the limits set by these entities.

4. **Private Mortgage Insurance (PMI):** If the borrower’s down payment is less than 20% of the home’s purchase price, private mortgage insurance may be required. PMI protects the lender in case the borrower defaults on the loan. Once the borrower’s equity in the home reaches 20% or more, PMI can typically be canceled.

5. **Interest Rates:** Conventional mortgage interest rates can be fixed or adjustable. Fixed-rate mortgages have a consistent interest rate over the life of the loan, while adjustable-rate mortgages (ARMs) may have a variable interest rate that can change periodically.

6. **Loan Terms:** Conventional mortgages offer a variety of loan terms, such as 30-year and 15-year fixed-rate mortgages. Borrowers can choose the term that best fits their financial goals and budget.

7. **Property Type:** Conventional mortgages are suitable for a variety of property types, including single-family homes, condominiums, and multi-unit properties. However, some property types may have additional requirements.

Conventional mortgages are a common choice for homebuyers with strong credit and a substantial down payment. The absence of government insurance or guarantees means that lenders bear more risk with these loans, and therefore, the qualification criteria can be more stringent compared to government-backed alternatives. Borrowers should carefully compare loan terms, interest rates, and costs from different lenders when considering a conventional mortgage.