What is a conventional loan?
Conventional loans follow guidelines set by Fannie Mae and Freddie Mac (for "conforming" loans) or by private investors (for jumbo and non-conforming loans). They're the most common type of mortgage in the U.S. and work well for buyers with solid credit and steady income.
Conventional loan highlights
- Low down payment options: as little as 3% down for eligible first-time and qualifying buyers.
- Removable PMI: private mortgage insurance can come off once you reach enough equity.
- No PMI with 20% down: put 20% down and skip mortgage insurance entirely.
- Any occupancy: primary residence, second home or investment property.
- Flexible terms: 30-year, 15-year and other fixed or adjustable options.
- Higher loan amounts: conforming limits are set yearly, and jumbo options are available above them.
Who is a conventional loan best for?
Conventional loans are often the best value for borrowers with a credit score of 620 or higher, steady documented income and some savings. They're also the go-to loan for second homes and rental properties when you want to qualify on your personal income.
How I structure conventional loans
Pricing on a conventional loan depends on credit score, down payment, property type and occupancy. I look at your full profile to find the right combination. Sometimes a small change, like paying down one balance or adjusting your down payment, can meaningfully improve your terms.
Conventional loan FAQs
What is the minimum down payment on a conventional loan?
Eligible first-time buyers and qualifying borrowers can put as little as 3% down. Many other buyers can put 5% down. Putting 20% down avoids PMI.
When can I remove PMI on a conventional loan?
You can generally request removal once your balance reaches 80% of the home's original value. It's automatically cancelled at 78% if your payments are current. If your home's value rises, you may be able to remove it sooner with a new appraisal, depending on your servicer's rules.
What credit score is needed for a conventional loan?
Most conventional loans require a minimum score of around 620. Higher scores usually get better pricing and lower mortgage insurance costs.
Can I buy a second home or rental property with a conventional loan?
Yes. Conventional loans work for primary homes, second homes and investment properties, with different down payment and reserve requirements for each. If you'd rather qualify on the property's rent instead of your own income, see DSCR loans.
Guidelines, loan limits and pricing change over time and vary by investor. All loans are subject to credit approval and underwriting. This is not a commitment to lend.