A conventional loan is a mortgage that is not insured by the government. The rates and terms are generally fixed. Mortgages are typically one of two things, they are either government supported or they are conventional. In the long run, conventional loans can save a borrower money by not having to pay mortgage insurance upfront, and/or they might not have to pay the monthly mortgage insurance.
The different types of conventional loans are: conforming loans, non-conforming loans, jumbo loans, portfolio loans, and sub-prime loans. A conforming loan follows the specific guidelines of Fannie Mae and Freddie Mac; non-conforming loans are ones that do not follow government sponsored enterprises. A jumbo loan is a loan that lends more money than your traditional Fannie Mae and Freddie Mac loan; this is beneficial if you are buying a high-priced home in an expensive market. Portfolio loans are loans in which the lender sets their own specific guidelines, and a sub-prime loans are for borrowers with bad credit. A sub-prime loan generally has a lot of fees and high interest rates.