Conventional Mortgage

What is a 'Conventional Mortgage'

A conventional mortgage is a type of mortgage in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac. About 35-50% of mortgages, depending on market conditions and consumer trends, are conventional mortgages. In other words, Fannie Mae and Freddie Mac guarantee or purchase 35-50% of all mortgages. Conventional mortgages may be fixed-rate or adjustable-rate mortgages.

BREAKING DOWN 'Conventional Mortgage'

The secondary market for conventional mortgages is extremely large and liquid. Most conventional mortgages are packaged into pass-through mortgage-backed securities, which trade in a well-established forward market known as the mortgage TBA (to be announced) market. Many conventional pass-through securities are further securitized into collateralized mortgage obligations (CMOs).

RELATED TERMS
  1. Nonconforming Mortgage

    A mortgage that does not meet the guidelines of Government Sponsored ...
  2. Fannie Mae - Federal National Mortgage ...

    A government-sponsored enterprise (GSE) that was created in 1938 ...
  3. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  4. Gnomes

    15-year, fixed-rate, pass-through securities offered by the Federal ...
  5. Primary Mortgage Market

    The market where borrowers and mortgage originators come together ...
  6. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
Related Articles
  1. Personal Finance

    Fannie Mae, Freddie Mac And The Credit Crisis Of 2008

    Is the U.S. Congress' failure to rein in these mortgage giants to blame for the financial fallout?
  2. Personal Finance

    Fannie Mae and Freddie Mac, Boon Or Boom?

    These two companies are crucial to the mortgage market, but are they ticking timebombs?
  3. Markets

    Should You Invest In Fannie Mae Stock?

    If you're risk-adverse, you might want to avoid investing in Fannie Mae. But if you're up for it, high risk could translate to high reward.
  4. Markets

    How Fannie Mae And Freddie Mac Were Saved

    These mortgage giants had to be put under government conservatorship, driving home the gravity of the subprime crisis.
  5. Managing Wealth

    Jumbo Vs. Conventional Mortgages: How They Differ

    Size does matter – and it affects everything from down payments to interest deductions.
  6. Markets

    Why Fannie Mae And Freddie Mac Might Be In Trouble

    Fannie Mae and Freddie Mac are under increased scrutiny as debates continue about conservatorship, share price, and profit allocations.
  7. Personal Finance

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  8. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  9. Managing Wealth

    The Homebuyer's Guide To Jumbo Mortgages

    What they are – and what it takes to get one.
  10. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
RELATED FAQS
  1. How does Fannie Mae (FNMA) make money?

    Fannie Mae is a government-sponsored enterprise (GSE) established in 1938 to expand the flow of mortgage money by creating ... Read Answer >>
  2. How do I apply for a loan through a government agency?

    I want to apply for a home loan with Freddie Mac or Fannie Mae. I am not having much luck. Where do I apply?  ... Read Answer >>
  3. What is the process to take over a mortgage through a loan assumption?

    My landlord wants me to take over her mortgage.  ... Read Answer >>
  4. If my mortgage lender goes bankrupt, do I still have to pay my mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Sorry to disappoint, but there ... Read Answer >>
  5. What are the best ways to invest in mortgage-backed securities (MBS)?

    Find out how you can start investing in real estate through mortgage-backed securities. Read Answer >>
  6. Can I buy a house directly from Fannie Mae (FNMA)?

    Yes; you can buy homes directly from Fannie Mae. Fannie Mae (the Federal National Mortgage Association, or FNMA) is a government-sponsored ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center