Conventional Loans

Flexible, competitive financing for qualified buyers

What is a conventional loan?

A conventional loan is any mortgage not insured by a government agency. Most conventional loans are 'conforming,' meaning they meet Fannie Mae and Freddie Mac guidelines for loan size, credit, and documentation, which lets lenders sell them on the secondary market and pass lower pricing on to you. Conventional financing is the most common way Americans buy homes, and it is usually the lowest lifetime-cost option for borrowers with solid credit.

Ideal for: Buyers with credit at or above 620, stable income, and at least 3%–5% to put down who want flexible terms and the ability to eliminate mortgage insurance.

Key Benefits

  • Down payments as low as 3% (Conventional 97)
  • No upfront mortgage insurance premium
  • PMI can be cancelled once you reach 20% equity
  • Available for primary homes, second homes, and rentals
  • Terms from 10 to 30 years, fixed or adjustable
  • Higher loan limits than FHA in most counties

    • How Conventional Loans Work

    Qualify on credit and capacity

    Lenders look at your credit score, debt-to-income ratio, assets, and employment history. Automated underwriting through Fannie Mae or Freddie Mac returns a decision in minutes once your documents are in.

    Choose your down payment

    Conventional 97 programs allow 3% down for eligible first-time buyers; 5%, 10%, and 20% down are all common. The more you put down, the lower your mortgage insurance and rate adjustments.

    Pay PMI only until 20% equity

    Private mortgage insurance applies below 20% down, but it is monthly-only (no upfront premium) and cancels automatically at 78% loan-to-value, or on request at 80%.

    Lock, close, and drop PMI later

    After closing, you can request PMI removal once your balance or a new appraisal shows 20% equity — a savings path FHA loans generally do not offer.

    Conventional Loans Requirements at a Glance

    Minimum credit score

    620 (740+ for best pricing)

    Minimum down payment

    3% first-time buyer, 5% standard

    Max debt-to-income

    Typically 45%, up to 50% with reserves

    Mortgage insurance

    Monthly PMI below 20% down, cancellable

    Property types

    Primary, second home, investment

    What it costs

    Expect standard closing costs of roughly 2%–5% of the purchase price: origination, appraisal, title, recording, and prepaid taxes and insurance. There is no upfront mortgage insurance premium, so conventional closing costs are often lower than FHA on the same purchase price.

    Things to Consider

  • Credit score minimum is typically 620, and pricing improves sharply above 740
  • Rate and fee adjustments are tied to credit score and down payment
  • Debt-to-income above 45% usually needs strong compensating factors
  • Condos and unique properties face stricter project and appraisal review

    • Conventional Loans FAQs

    What credit score do I need for a conventional loan?

    620 is the usual floor. Pricing improves at 680, 700, 740, and 760, so even a 20-point increase before you lock can change your rate.

    Can I really buy with 3% down on a conventional loan?

    Yes. Conventional 97 and the HomeReady and Home Possible programs allow 3% down for eligible buyers, often with reduced mortgage insurance for qualifying incomes.

    How do I get rid of PMI on a conventional loan?

    You can request cancellation at 80% loan-to-value based on your original value, and it must be removed automatically at 78%. A new appraisal after improvements or appreciation can accelerate that.

    Is a conventional loan better than FHA?

    It depends on your credit. Above roughly 680 with 5% down, conventional is usually cheaper over time because PMI cancels. Below 660, FHA pricing is frequently better.

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