QandAs: Loans

What is a conventional mortgage loan?

Answer:
A conventional mortgage loan is a term we use

in the United States to describe a mortgage loan that is a fixed interest rate for a fixed time period. I believe this term isn't used in other countries. In other countries they usually don't offer fixed rate, fixed term mortgage loans so the term isn't applicable.

So what is an unconventional mortgage loan or a loan not considered conventional? Usually, unconventional mortgage loans are considered Adjustable Rate Mortgages, Hybrid ARMs, and Interest Only Mortgages. Because these are relatively new mortgage products they are considered unconventional. ARMs and Interest Only mortgages are becoming more common so eventually we may find the term "conventional mortgage" phased out.

A conventional mortgage would be considered a 15, 20 or 30 year fixed rate mortgage. These are old products and more conventional compared to the new products that are designed to cater to each individual.


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