Written and reviewed by Jack Gladden, Senior Loan Officer, NMLS #1470164
Updated · 6-minute read · How these guides are written
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Conventional loans in brief
- What it is
- A mortgage not backed by a government agency, usually following Fannie Mae or Freddie Mac rules, so it can be sold to them.
- Down payment
- As little as 3% for qualifying first-time and moderate-income buyers; more for second homes and rentals.
- Credit
- Most lenders look for about 620 or higher, with better pricing at higher scores; Fannie Mae itself no longer sets a minimum for loans approved through its automated underwriting.
- Mortgage insurance
- Needed with less than 20% down, and it ends: you can ask to cancel at 80% of the original value, and it stops automatically at 78%.
- Use
- Primary homes, second homes and investment properties, one to four units.
- Limits
- In 2026, up to $832,750 for a one-unit home in most counties, and up to $1,249,125 in high-cost counties.
What conventional lenders look for.
| Requirement | What’s typical |
|---|---|
| Credit | 620 minimum for most programs; 740 and above usually gets the best pricing. |
| Down payment | From 3% for qualifying buyers on a primary home; often 10% for a second home and 15–25% for a rental. |
| Debt-to-income | Usually up to about 45%, and up to 50% with strong credit or reserves. |
| Reserves | Often none on a primary home; more for second homes, rentals and multi-unit properties. |
| Down payment sources | Savings, gifts from family, or down payment assistance. |
| Loan size | Up to the 2026 conforming limit for your county: $832,750 in most counties, up to $1,249,125 in high-cost ones. Above that, see jumbo loans. |
Want to see conventional and FHA side by side?
Send me your credit range, down payment and price range, and I’ll price both, including mortgage insurance.
Look up any county in Arizona, California, Florida or Ohio: 2026 loan limits by county.
Private mortgage insurance, and when it ends.
With less than 20% down, a conventional loan carries private mortgage insurance (PMI), usually as a monthly charge. Its cost falls as your credit score and down payment rise. Unlike FHA’s insurance, PMI doesn’t last forever. Federal law sets when it ends:
- At 80% of the original value
- You can ask your servicer in writing to cancel it, if your payments are current, there’s no second mortgage, and the home hasn’t lost value.
- At 78%
- It ends automatically on the date your balance is scheduled to reach 78% of the original value.
- At the midpoint
- It ends the month after you reach the halfway point of the loan term, whatever the balance.
Paying down the loan faster, or a rise in value confirmed by a new appraisal, can bring cancellation sooner, depending on your servicer’s rules.
Conventional loan options.
30-year fixed
The lowest monthly payment for a fixed rate, the same for the life of the loan.
Best forMost buyers
15-year fixed
A higher payment, a lower rate, and much less interest overall.
Best forPaying off faster
Adjustable rate (ARM)
A fixed rate for the first years, then adjusting.
Best forSee adjustable-rate mortgages
3%-down programs
Low down payment options for first-time and moderate-income buyers, some with income limits.
Best forSee first-time buyers
Conventional or FHA?
| Conventional | FHA | |
|---|---|---|
| Credit | Usually 620+ | From 500 with 10% down, 580 with 3.5% |
| Minimum down | 3% for qualifying buyers | 3.5% |
| Mortgage insurance | Ends at 78–80% of the original value | Often for the life of the loan |
| Upfront fee | None | 1.75% of the loan |
| Property | Primary, second home or investment | Primary home only |
| Best for | Good credit, 5%+ down | Lower scores or higher debt-to-income |
With a score around 680 or higher and 5% or more down, conventional often costs less over time. With lower scores, FHA can be cheaper. I price both. See FHA loans.
The trade-offs.
- Credit matters more. Rates and mortgage insurance cost rise noticeably at lower scores.
- Stricter debt-to-income. Less room for high debts than FHA.
- Loan limits. Above your county’s limit, you’re into jumbo territory.
- Self-employed income. Tax returns after write-offs can limit what you qualify for; see self-employed loans.
How we get started.
Tell me your goals
Price range, down payment, credit range and how long you plan to stay.
I compare programs
Conventional, FHA and others side by side, including mortgage insurance and costs.
Pre-approval
Your price range in writing for offers.
Appraisal and closing
Underwriting, appraisal and your keys.
Conventional loans, answered plainly.
What exactly is a conventional loan?
A mortgage that isn’t insured or guaranteed by the government. Most follow Fannie Mae and Freddie Mac rules. See also: FHA vs conventional loans.
Do you have to put 20% down on a conventional loan?
No. Qualifying buyers can put as little as 3% down; with less than 20% down you’ll pay mortgage insurance until it’s cancelled.
Can I get a 3% down conventional loan?
Yes, through programs for first-time buyers and moderate-income buyers on a primary home, some with income limits.
Which is better, conventional or FHA?
Conventional usually costs less with good credit and 5% or more down, because its mortgage insurance ends. FHA can be better with lower scores. I price both.
How hard is it to qualify for a conventional loan?
With a 620+ score, steady income, debt-to-income under about 45% and the down payment, most buyers qualify.
How much income do I need to qualify for a conventional loan?
Lenders compare your total monthly debts, including the new payment with taxes, insurance and any mortgage insurance, to your gross monthly income. Conventional loans usually allow up to about 45%, and up to 50% with strong credit or reserves. So the income you need is roughly (the new housing payment plus your other monthly debts) ÷ 0.45. Tell me the price, your down payment and your debts, and I’ll work out the exact figure at today’s rates.
What is the maximum conventional loan in my area?
In 2026, $832,750 for a one-unit home in most counties, and more in high-cost counties: $1,249,125 in Los Angeles and Orange, $1,104,000 in San Diego. See also: DSCR vs conventional investment loans.
When does PMI come off?
You can request cancellation at 80% of the original value, and it ends automatically at 78% or at the loan’s midpoint.
What disqualifies you from a conventional loan?
A credit score below about 620, a debt-to-income ratio above the program’s limit, too little money for the down payment and closing costs, a recent bankruptcy or foreclosure inside the waiting period, or a property or condo building that doesn’t meet the guidelines.
What are the downsides of a conventional loan?
Stricter credit expectations than FHA, and mortgage insurance that costs more with a lower score. For borrowers with strong credit, these rarely matter, which is why conventional is usually the first loan I price.
FHA
Jumbo
Adjustable-rate (ARM)
First-time buyers & down payment help