What Is a Conventional Loan?
Conventional loans are mortgages that are not backed by any government agency. They are typically guaranteed by Fannie Mae or Freddie Mac. Because they lack government backing, they generally require stronger credit scores and higher down payments than FHA or VA loans.
For borrowers with good to excellent credit, conventional loans often offer the lowest interest rates and most flexible terms available in the market.
Who Is It For?
- Borrowers with strong credit histories (620+ minimum, 740+ ideal)
- Buyers with a 3% to 20%+ down payment available
- Investors buying secondary or rental properties
Key Requirements
- Min. Credit Score 620
- Min. Down Payment 3% (First-Time) / 5% (Repeat)
- Max. DTI Ratio Up to 50%
- Mortgage Insurance Required if down < 20%
Key Benefits
No PMI with 20% Down
Avoid monthly mortgage insurance entirely with a 20% down payment.
PMI Can Be Canceled
Unlike FHA loans, conventional PMI drops off once you reach 20% equity.
Flexible Property Types
Can be used for primary residences, second homes, and investment properties.
Higher Loan Limits
Borrow larger amounts compared to standard FHA loan limits in most counties.