Conventional Loans
Conventional loans are the most common mortgage type in the country. According to the Consumer Financial Protection Bureau, they make up roughly 70% of new mortgage originations. So why are they this popular? Because they work across a wide range of buyers, property types, and financial situations with mortgage insurance that doesn't last forever.
If you have a credit score of 620 or above, stable income, and some savings set aside, then a conventional mortgage is worth a close look. Below you'll find qualification details, 2026 loan limits, and an honest take on when this program fits and when it doesn't.
How a Conventional Mortgage Works
A conventional loan isn't backed by a government agency. There's no FHA insurance, VA guaranty, or USDA support behind it. Instead, private lenders fund these loans using guidelines set by Fannie Mae and Freddie Mac.
Most conventional loans are also "conforming." That means they fall within the dollar limits the Federal Housing Finance Agency publishes each year. However, if a loan exceeds those limits, it moves into jumbo loan territory with different qualification standards.
Because there's no government backing, your credit profile and down payment carry more weight during underwriting. But that comes with a meaningful advantage: private mortgage insurance (PMI) can be removed once you build enough equity. Government-backed programs typically don't offer that option.
2026 Conventional Loan Limits
For 2026, the FHFA raised the baseline conforming limit to $832,750 for one-unit properties, up from $806,500 the year before. In designated high-cost areas, the 1 unit ceiling goes up to $1,249,125.
| Property Units | Baseline Limit | High-Cost Limit |
|---|---|---|
| 1 Unit | $832,750 | $1,249,125 |
| 2 Units | $1,066,250 | $1,599,375 |
| 3 Units | $1,288,800 | $1,933,200 |
| 4 Units | $1,601,750 | $2,402,625 |
Loans that exceed these amounts require jumbo financing, which typically means higher credit scores, larger reserves, and bigger down payments.
Conventional Loan Requirements
Each lender applies its own standards on top of Fannie Mae and Freddie Mac guidelines. Still, here's what a typical qualification picture looks like for most borrowers.
| Requirement | Details |
|---|---|
| Credit Score | 620 minimum, more favorable pricing at 740+ |
| Down Payment | As low as 3%* (PMI required below 20%) |
| Debt-to-Income Ratio | Generally up to 45%, sometimes 50% with compensating factors |
| Loan Amount (2026) | $832,750 baseline / $1,249,125 high-cost |
| Property Types | Primary residence, second home, investment property |
| Income History | Two years of W-2s, tax returns, or equivalent documentation |
| Mortgage Insurance | Required below 20% down, removable at 20% equity |
Self-Employed or Complex Income?
If you're self-employed or have complex income, qualification is still possible. However, the documentation process looks different.
Also, if you want a rough sense of monthly payments, our mortgage calculator gives you a starting point before you talk to anyone.
What You Can Use a Conventional Loan For
Because government-backed programs typically restrict you to a primary residence, property-type flexibility is one of the biggest advantages of conventional financing. As a result, a conventional mortgage gives you more options than most alternatives.
Down payment and reserve requirements do increase for second homes and investment properties. But the option still exists, which isn't the case with most government programs.
Conventional Loan Advantages and Trade-Offs
- PMI drops off at 20% equity per the Homeowners Protection Act
- No upfront funding or mortgage insurance fee at closing
- Down payments as low as 3% for qualified buyers*
- Also available for second homes and investment properties
- Flexible terms: 10, 15, 20, 25, or 30 years
- Typically lower total cost for borrowers with strong credit
- Higher credit floor than government-backed options (620 vs. 580)
- PMI costs add up when combining a low down payment with mid-range credit
- Tighter DTI limits than some government programs allow
- Rate pricing is more sensitive to credit score differences
- Investment properties require larger reserves and down payments
Have questions about your specific situation? A short call can tell you more than another hour of research.
Start a Real ConversationHow a Conventional Loan Worked for One Borrower
The 20% Down Myth
For example, a married couple came to us with credit scores of 730 and 710. They'd saved about 10% toward a home purchase but assumed they needed 20% down. Why? Because a friend had told them so.
After one conversation with a loan officer, they learned that wasn't the case. In fact, they qualified with just 10% down. PMI added a manageable amount to the monthly payment, and it's set to come off once they reach 22% equity.
Because they chose conventional, they also avoided the upfront mortgage insurance premium that comes with government-backed alternatives. As a result, the savings at closing were significant. And their long-term picture improved because mortgage insurance won't last the full loan term.
When Another Program Might Fit Better
Conventional financing works well for many borrowers, but it's not always the strongest path. Here are a few situations where a different program may make more sense.
FHA loans accept scores as low as 580 with a 3.5% down payment and as low as 500 with 10% down.
Since VA loans offer zero down payment and no mortgage insurance, they're often the stronger choice for eligible borrowers.
If you're a business owner or freelancer, a non-QM loan may offer more flexibility than standard conventional underwriting.
Still not sure which direction makes sense? That's exactly the kind of question a short conversation can answer. You can also browse all available options on our mortgage loan programs page.
Get Honest Answers From Someone Who Knows
Mortgage information online can be confusing and contradictory. A real conversation with a loan officer clears up more than another hour of searching.
Ask a Real QuestionFAQs Conventional Loans
No. For example, qualified buyers can put down as little as 3% through programs like Fannie Mae HomeReady and Freddie Mac Home Possible. You'll pay PMI until you reach 22% equity.
Most lenders require at least 620. However, your rate and PMI costs improve meaningfully at 680, 720, and 740+. According to Fannie Mae's loan-level price adjustments, the gap between a 660 score and a 760 score can significantly change your rate and monthly payment even with the same down payment.
All conforming loans are conventional, but not every conventional loan is conforming. "Conforming" means the loan amount stays within the FHFA's annual limits of $832,750 for most areas in 2026. If a conventional loan exceeds that limit, it becomes a jumbo loan with different underwriting rules.
Absolutely! This is one of the most meaningful cost advantages of conventional financing. Under the Homeowners Protection Act, your lender must cancel PMI automatically when your loan balance reaches 78% of the original home value. You can also request removal once you hit 80% loan-to-value.
Yes! In fact, conventional loans are one of the few mortgage types available for both investment properties and second homes. However, you should expect a larger down payment (typically 15-25%), a higher credit score threshold, and more cash reserves compared to a primary residence purchase.
Conventional Loan Disclaimer
Advertising Disclosure: A 3% minimum down payment applies to qualified borrowers on select conventional loan programs, including Fannie Mae HomeReady® and Freddie Mac Home Possible®, for primary residences only. These programs may have income limits and additional eligibility requirements. Any down payment of less than 20% requires private mortgage insurance (PMI), which increases the monthly payment and total cost of the loan until sufficient equity is reached. Loan Example: A $400,000 conventional loan for the purchase of a $421,053 primary residence with a 5% down payment ($21,053) at a 6.500% fixed interest rate for 30 years (360 monthly payments) would result in a monthly principal and interest payment of approximately $2,528. This example assumes a borrower credit score of 740 and includes estimated PMI. At that rate, the Annual Percentage Rate (APR) is approximately 6.750%, which reflects the interest rate plus PMI and estimated closing costs amortized over the loan term. The scenario and loan example above reflect specific borrower profiles and are not representative of all applicants. Credit scores, down payment amounts, and loan structures will affect actual results. Taxes, homeowners insurance, and any HOA dues are not included in this payment example and would increase your total monthly obligation. Your actual interest rate, APR, monthly payment, down payment requirement, and closing costs will depend on your specific credit score, down payment amount, loan amount, property type, occupancy status, and other factors determined at the time of application. Rates and terms are subject to change without notice. Not all applicants will qualify. Nothing on this page is a commitment to lend or a guarantee of any specific rate or terms. Conforming loan limits referenced are based on 2026 Federal Housing Finance Agency guidelines and apply to loans eligible for purchase by Fannie Mae and Freddie Mac.