Conventional Loans
Standard financing not backed by a government agency.
Overview
Conventional loans are the most common type of mortgage and, when conforming, are underwritten to Fannie Mae or Freddie Mac guidelines rather than being insured by a government agency like the FHA or VA. They're available with fixed or adjustable rates and can be used for primary residences, second homes, and investment properties, making them a flexible baseline option for many borrowers.
Who It’s For & What You’ll Need
- A credit score that generally meets a higher minimum than many government-backed programs, though the exact threshold varies by lender and specific program
- A down payment that can be as low as 3% for qualifying first-time buyers under certain conventional programs
- Private mortgage insurance (PMI) if your down payment is under 20%, which can typically be removed once you reach sufficient equity
- A qualifying debt-to-income ratio under the lender’s conventional guidelines
- Standard income, asset, and employment documentation
Benefits
- PMI can be canceled once you reach the required equity threshold, unlike mortgage insurance on some government-backed loans
- Usable for primary residences, second homes, and investment properties
- A range of term lengths and fixed or adjustable-rate structures
- No upfront mortgage insurance premium like some government-backed programs charge
Common Scenarios
- A buyer with strong credit and a 10–20% down payment who wants to avoid long-term mortgage insurance.
- A borrower buying a second home who doesn’t qualify for government-backed programs limited to primary residences.
- A first-time buyer using a low-down-payment conventional program instead of FHA to avoid FHA’s mortgage insurance structure.
Frequently Asked Questions
What’s the minimum down payment for a conventional loan?
Some conventional programs allow down payments as low as 3% for qualifying first-time buyers, though most conventional loans are structured around a 5% or higher down payment; the exact minimum depends on the specific program and your qualifications.
What’s the real difference between conventional and FHA loans?
FHA loans are insured by a government agency and tend to have more flexible credit guidelines with mortgage insurance that can last the life of the loan. Conventional loans generally require stronger credit but let you remove PMI once you build enough equity.
When does PMI go away on a conventional loan?
Under federal law, PMI on most conventional loans must automatically terminate once your loan balance reaches 78% of the home’s original value, and you can typically request cancellation once you reach 80%, subject to your servicer’s requirements.
Can I use a conventional loan for an investment property?
Yes, though investment property conventional loans typically require a larger down payment and stronger reserves than a loan for a primary residence.
Related Calculators
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Ready to Move Forward with Conventional Loans?
Start your application, or talk it through with a loan officer first — whichever fits where you are.