Conventional Loans

A conventional loan is a mortgage that is not insured or backed by the federal government. These were the original mortgage loans provided by local lenders, who kept them in their portfolios until they were either repaid or foreclosed. While this allowed borrowers to build relationships with their lenders, it often wasn’t financially advantageous for lenders. If interest rates increased, they were stuck with lower-rate loans and had limited flexibility to reinvest their funds in new loans.