Conventional loans are not guaranteed or insured by the Veteran's Administration (VA) or Federal Housing Administration (FHA). The majority of conforming conventional loans follow the mortgage guidelines established by the government-sponsored entities known as Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

Conventional mortgages with less than 20% down require private mortgage insurance. Since conventional loans are not insured by the federal government, there is no guarantee for the lender if the borrower defaults on mortgage payments. These loans are considered higher risk for lenders and generally have more restrictive underwriting guidelines than government-backed loans.