Business and Personal Finance Dictionary

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• CONVENTIONAL LOAN
  
  A loan made with real estate as security and not involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan. The mortgagee can be an institutional lender or a private party. The loan is conventional in the sense that it conforms to accepted standards and the lender looks solely to the credit of the borrower and the security of the property to ensure payment of the debt. Conventional loans include those loans insured by private mortgage insurance companies. Because the lender is not subject to the more stringent government regulations of the FHA and VA, conventional loans are frequently more flexible with respect to terms and interest rates, although they do reflect a higher interest rate and larger down payment requirements due to the higher risk involved. Nonconventional loan interest rates (VA loans) are fixed by federal regulation. Conventional loans are subject to institutional regulation, which may be statutory (federal, state) or self-created. (See FHA, VA loan)
  
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