Conventional Loans
Smart Financing for Strong Buyers
No government backing. No agency requirements. Just competitive rates, flexible terms, and maximum versatility for buyers who qualify. A conventional loan could be your most powerful path to homeownership.
What Is a Conventional Loan?
A conventional loan is any mortgage that isn't backed or insured by the federal government. Unlike VA, FHA, or USDA loans, conventional mortgages are offered by private lenders and follow guidelines set by Fannie Mae and Freddie Mac the two government-sponsored enterprises that purchase most conventional loans on the secondary market.
Because they aren't government-guaranteed, conventional loans typically require stronger credit profiles and larger down payments than government-backed alternatives. But for buyers who qualify, they offer advantages that government-backed loans simply can't match: no upfront mortgage insurance premiums, PMI that automatically cancels at 20% equity, and the ability to finance a wider variety of properties including investment properties and second homes.
They're also the most common type of mortgage in America, the benchmark that most other loan types are compared against. If you have solid credit, stable income, and a reasonable down payment, a conventional loan is often the most cost-effective long-term choice.
Conventional = not government-backed. It does NOT mean more difficult. Millions of Americans get conventional loans every year including first-time buyers with 3% down. The term refers to the loan's structure, not its accessibility.
Most conventional loans must meet "conforming" guidelines set by Fannie Mae and Freddie Mac. These include loan limits, debt-to-income ratios, and credit standards. Loans that exceed the limit are called "jumbo" and follow different rules. We work with both.
If your down payment is less than 20%, you'll pay private mortgage insurance (PMI) but only until you reach 20% equity. At that point, PMI is automatically removed. FHA loans charge mortgage insurance for the life of the loan in most cases. That's a key long-term cost difference.
Conforming vs. Jumbo Conventional Loans
All conventional loans fall into one of two categories based on loan size. Here's what separates them and how to know which one applies to you.
Conforming Conventional Loan
A conforming loan stays within the loan limits set annually by the Federal Housing Finance Agency (FHFA). For 2025, the baseline conforming limit is $806,500 for single-family homes in most areas, with higher limits in high-cost counties.
- ✓ Loan amount within FHFA conforming limits
- ✓ 3% minimum down for first-time buyers
- ✓ 620+ credit score typically required
- ✓ PMI required below 20% down then removed
- ✓ Available for primary, secondary, investment
- ✓ Most competitive rates and widest lender choice
- ✓ Can be fixed or adjustable rate
- ✓ 10, 15, 20, or 30-year terms available
Jumbo Conventional Loan
A jumbo loan exceeds the conforming loan limits meaning the lender keeps more of the risk and applies stricter qualification standards. They're the standard path for buying higher-priced properties that conforming limits won't cover.
- ✓ Loan amount exceeds FHFA conforming limit
- ✓ Typically 10–20% minimum down payment
- ✓ 700–720+ credit score usually required
- ✓ Lower DTI ratios typically required (43% or less)
- ✓ More cash reserves required post-closing
- ✓ Rates slightly higher than conforming but competitive
- ✓ Available for luxury primary and secondary homes
- ✓ Fixed and ARM options available
Conventional Loan Requirements
Conventional loans have clear benchmarks for qualification. Here's a breakdown of the main factors lenders evaluate and what the numbers typically need to look like.
Credit Score
Conventional loans require a stronger credit profile than government-backed options. Your credit score directly impacts your interest rate the higher your score, the lower your rate.
Down Payment
First-time buyers may qualify with as little as 3% down through Fannie Mae's HomeReady or Freddie Mac's Home Possible programs. Repeat buyers typically need 5% minimum. 20% eliminates PMI entirely.
Debt-to-Income Ratio
DTI is your total monthly debt divided by your gross monthly income. Conventional loans are more flexible than they used to be strong credit can compensate for a higher DTI in some cases.
Income & Employment
Lenders want to see 2 years of stable employment history. Self-employed borrowers need 2 years of tax returns. Income from freelance, rental, or other sources can often be counted with proper documentation.
Reserves & Assets
Most lenders want to see you have funds remaining after closing typically 2+ months of mortgage payments in reserve. Jumbo loans often require 6–12 months. Retirement accounts typically count at 60–70%.
Property Type
Conventional loans can be used on primary residences, vacation homes, and investment properties making them the most versatile mortgage type available. Property must meet lender appraisal standards.
Private Mortgage Insurance What It Is and When It Ends
PMI is required when your down payment is less than 20% on a conventional loan. It protects the lender not you in case of default. Think of it as the cost of borrowing with a smaller upfront investment.
PMI typically costs between 0.5% and 1.5% of your loan amount per year. On a $300,000 loan, that's roughly $125–$375 per month. It's a real cost, but it's also temporary and it's still often cheaper than the alternative of waiting years to save a 20% down payment.
The big advantage of PMI on a conventional loan versus mortgage insurance on an FHA loan: it goes away. By law, lenders must automatically cancel PMI once you reach 22% equity. You can also request cancellation at 20% equity or get there faster through additional principal payments or home value appreciation.
Conventional vs. Government-Backed Loans
How does a conventional loan stack up against FHA, VA, and USDA options? Here's the honest comparison.
| Feature | Conventional | VA Loan | FHA Loan | USDA Loan |
|---|---|---|---|---|
| Min. Down Payment | 3–5% | 0% | 3.5% | 0% |
| Mortgage Insurance | PMI — removed at 20% | None ever | MIP for loan life | Annual fee (life) |
| Min. Credit Score | 620+ | No minimum (VA) | 500–580+ | 640+ |
| Loan Limits | $806,500 conforming limit | None (full entitlement) | County limits | County limits |
| Property Types | Primary, 2nd home, investment | Primary only | Primary only | Rural primary only |
| Upfront Fee | None | VA Funding Fee | 1.75% MIP upfront | 1% guarantee fee |
| Who Qualifies | Any qualifying borrower | Military/veterans only | Any qualifying borrower | Rural area buyers |
| Best For | 620+ credit, 5%+ down | Veterans & service members | Lower credit scores | Rural homebuyers |
Who Benefits Most from a Conventional Loan?
Conventional loans aren't for everyone but for the right buyer, they're often the best long-term financial choice. Here's who they're built for.
Buyers with Strong Credit (720+)
Borrowers with excellent credit scores get the lowest conventional rates often better than what's advertised. If your credit is strong, a conventional loan will likely outperform any government-backed alternative on total cost over time.
Buyers Putting 20% Down
A 20% down payment eliminates PMI entirely from day one making the monthly payment lower than any other loan type on the same purchase price. No upfront MIP like FHA, and no funding fee like VA.
Buyers of Investment Properties or Second Homes
VA and FHA loans require owner-occupancy. Conventional loans are the only widely available mortgage product that works for vacation homes and investment properties giving real estate investors maximum flexibility.
Repeat Buyers with Built-Up Equity
If you're selling your current home and using the proceeds as a large down payment, a conventional loan lets you maximize that equity potentially reaching 20% down and going PMI-free immediately.
Buyers Who Want to Build Equity Fast
With no upfront insurance premiums (unlike FHA's 1.75% MIP), more of your money goes directly into your home on day one. A lower loan-to-value also means a better rate and faster equity building over time.
Buyers in High-Cost Markets (Jumbo)
If you're purchasing a home above the conforming loan limit, a jumbo conventional loan is the path forward. With a strong credit profile and reserves, we can access competitive jumbo rates that make high-value purchases work.
6 Factors That Determine Your Conventional Loan Rate
Conventional loan rates aren't one-size-fits-all. Lenders use a risk-based pricing model here's exactly what moves your number up or down.
Credit Score
The single biggest rate driver. A 760+ score typically earns the best rates. Each tier below that adds incremental cost. A 620 vs. a 760 can mean a difference of 0.5–1.5% on your rate.
Loan-to-Value (LTV)
The lower your LTV (i.e., the more you put down), the lower your risk to the lender and the better your rate. 20% down is the threshold that also eliminates PMI, making it a double win.
Loan Term
15-year loans typically carry lower rates than 30-year loans but higher monthly payments. The right term depends on your monthly cash flow and how long you plan to stay in the home.
Property Type
Single-family primary residences get the best rates. Condos, multi-unit properties, second homes, and investment properties all carry slight rate adjustments due to their different risk profiles.
Loan Size
Jumbo loans typically price slightly higher than conforming loans of the same profile. Super-conforming loans in high-cost areas fall between the two. Loan size itself is a pricing layer in the rate model.
Market Conditions
Mortgage rates move daily based on bond markets, Fed policy, and economic data. Locking your rate at the right time and with the right lender can save you significantly even in a stable rate environment.
The Conventional Loan Process
From pre-qualification to your closing date here's the streamlined path we take every borrower through.
Pre-Qualification
We review your income, credit, and debts to determine your maximum loan amount and issue a pre-qual letter in 24 hours or less.
Loan Application
Submit a full application with supporting documents. We'll tell you exactly what we need — no guesswork, no back-and-forth.
Appraisal & Title
A licensed appraiser confirms the home's value. Title search verifies clean ownership. Both happen concurrently to save time.
Underwriting
Our underwriting team verifies your complete file. We stay in constant contact so any conditions are cleared quickly and cleanly.
Close & Fund
Sign your closing documents, transfer your down payment and closing costs, and receive your keys. You're officially a homeowner.
Conventional Loan FAQ
Can I get a conventional loan with less than 20% down?
Absolutely. Conventional loans allow down payments as low as 3% for first-time buyers through programs like Fannie Mae HomeReady and Freddie Mac Home Possible. Repeat buyers typically need 5% minimum. PMI is required until you reach 20% equity, but it drops off automatically unlike FHA insurance which often lasts the life of the loan.
What credit score do I need for the best conventional rate?
For the most competitive conventional rates, aim for 740 or higher. At 760+, you typically qualify for the best pricing tier. Between 620–739, you'll qualify but may pay a slightly higher rate. Every 20-point score tier matters in conventional rate pricing it's worth asking us to show you how different scores affect your payment.
Can I use a conventional loan for an investment property?
Yes this is one of the biggest advantages of conventional loans over VA and FHA options. Conventional loans can be used for primary residences, second/vacation homes, and investment properties (1–4 units). Investment properties typically require 15–25% down and carry a slightly higher rate than owner-occupied properties.
How does a conventional loan compare to a VA loan for veterans?
For eligible veterans and service members, a VA loan is almost always the better financial choice zero down payment, no PMI, and lower rates. The main exception is if you're buying an investment property or second home (VA requires owner-occupancy), or if you have strong credit and 20%+ down and want to preserve your VA entitlement for a future purchase.
Can I remove PMI before reaching 20% equity?
Yes, in some cases. If your home has appreciated significantly, you can request a new appraisal to demonstrate higher equity. If the appraisal shows you're at or above 20% equity based on current value, you can request PMI cancellation. This can save you thousands in insurance payments if your local market has seen strong appreciation since you purchased.
What is the 2025 conforming loan limit?
For 2025, the baseline conforming loan limit for a single-family home is $806,500 in most U.S. counties. High-cost areas have higher limits up to $1,209,750. Loans exceeding these limits are classified as jumbo and require different qualification standards. We can confirm the exact limit for your county.
Is a fixed or adjustable rate better for a conventional loan?
It depends on your timeline and risk tolerance. A 30-year fixed rate provides payment stability for the long term. A 15-year fixed saves significantly on interest. Adjustable-rate mortgages (ARMs) start lower and can be smart if you plan to sell or refinance within 5–7 years. We'll help you model both scenarios based on your specific situation.
Can I have a conventional loan and a VA loan at the same time?
Yes. Many veterans use their VA loan for their primary residence and a conventional loan for a second home or investment property since VA loans require owner-occupancy. This is a common strategy for veteran real estate investors. We can help you structure the most advantageous approach for your portfolio goals.
Ready to Find the Right Loan for Your Profile?
Whether a conventional loan is the best fit or another program serves you better we'll give you an honest answer and a clear plan. No pressure, no upselling. Just expert guidance you can trust.
No obligation. No hard credit pull to start. Results in 24 hours.
