What is typically a characteristic of a conventional mortgage?

A conventional mortgage typically adheres to guidelines set by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. One of the defining characteristics of conventional mortgages is their alignment with standard loan limits, which are established to ensure that the loans can be easily bought and sold in the secondary mortgage market. These limits are intended to promote a stable mortgage market and help maintain liquidity, allowing lenders to offer borrowers favorable terms.

While there are variations in conventional mortgages, such as conforming and non-conforming loans, the key feature remains that they usually fall within those established loan limits, differentiating them from other types of financing that may not have such criteria. This aspect is crucial as it influences the approval process and the interest rates borrowers can expect.

Understanding this characteristic helps both buyers and mortgage professionals navigate the mortgage landscape more effectively, particularly in selecting the right loan type for their financial situations.