Conventional loans are actually any type of creditor agreement that are not financed by the Veterans Administration (VA), or supported by the Federal Housing Administration (FHA). In general, all conventional loans are protected by the government sponsored entities such as Fannie Mae (FNMA) and Freddie Mac (FHLMC). 

There are different types of conventional loans that have their own peculiarities. Conforming and nonconforming types of conventional loans are the most common kind of subdivision. Conforming loans have to meet the guidelines set by Fannie May and Freddie Mac. One key feature is that the loan amount can not exceed the maximum loan limit set by Fannie and Freddie. 

  • The fact that the creditors can actually keep the loan in their own portfolios and in this way they provide themselves with more flexibility concerning the loans as it must not take any other direction when it comes to some other borrowers.
  • The creditors are free to add or on the contrary eliminate some of the fees on the loans.
  • In the case when a person who is willing to get a loan does not have all the possibilities to do that, the creditor has the opportunity to self-insure the loan at the same time increasing the interest rate so that to recompense for the risk he or she takes.

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