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A conventional loan is a type of loan, and a fixed loan is a loan product. Think of it this way, a dog is a kind of animal. A collie is a specific type of dog.
A conventional loan typically refers to a “conforming loan”. This would mean a loan that is underwritten to Fannie Mae or Freddie Mac guidelines. There are certain guidelines and characteristics that make it a conventional loan. Typically the borrower can show income and assets that are enough to qualify for the loan, a conventional borrower also would typically have very good credit. Essentially the borrower has to measure up to the guidelines of Fannie Mae and Freddie Mac to obtain a conventional loan.
A fixed loan is a loan in which the interest rate is fixed for the entire length of the loan. The term of the loan itself can vary from 10 to 30 years, in most 5 year increments, however the interest rate will remain the same throughout the entire life of the loan.
A fixed loan, or fixed rate mortgage can fall under the Fannie Mae or Freddie Mac umbrella, or it may be a jumbo loan, or a non-conventional or subprime loan. Opposing a fixed rate loan would be an adjustable rate loan, these products vary widely as well, and can just as easily be a conventional adjustable rate loan as any other type of loan.
In the end, a conventional loan is a group of loan products that meet specific qualifying criteria. A fixed rate loan is just one example of a loan product.
The easiest way to understand a Conforming loan is that it’s a loan for customers with good credit. Just as Sub-prime loans were for people with less than perfect credit. And while we’re at it the term “sub-prime” is actually incorrect. The correct way is Non-Conforming or Non-Conventional, but the media used the word sub-prime loosely. A conventional loan falls under Fannie Mae and Freddie Mac guidelines (the largest purchasers of loans).
A Fixed loan is a loan where the interest rate is fixed for the entire term of 10,15,20. or 30 years. Your mortgage payemnt stays the same throughout the term.
What is the differnce between conventional loan and a fixed loan?