Conventional Mortgage Loan

Conventional loans allow as little as 3% down for qualified first-time buyers, and 5% for repeat buyers in most cases. A larger down payment reduces your monthly payment, eliminates PMI sooner, and can unlock lower interest rates.

PMI is required when your down payment is less than 20%. Unlike FHA mortgage insurance, conventional PMI can be cancelled once your loan-to-value (LTV) ratio reaches 80%, saving you money in the long term. Your lender must automatically remove PMI at 78% LTV.

Yes, conventional loans have stricter credit and income requirements. However, borrowers with a credit score of 620+ and stable employment, and who make a 5% or higher down payment, often find conventional loans more cost-effective because they avoid FHA's lifetime mortgage insurance premiums.

Most lenders prefer a DTI of 43% or lower. Borrowers with strong credit scores and significant reserves may be approved at up to 50% DTI through Fannie Mae's Desktop Underwriter (DU) system. Your DTI is calculated by dividing total monthly debt payments by gross monthly income.

For 2026, the conforming loan limit is $832,750 for a single-unit home in most U.S. counties. High-cost areas such as parts of California, New York, and Hawaii have higher limits. Loans that exceed these limits are classified as jumbo loans and require separate qualification.

Conventional loans can finance primary residences, second homes, and investment properties. Eligible property types include single-family homes, condominiums, townhomes, and multi-unit properties (2–4 units). The property must meet Fannie Mae or Freddie Mac condition standards.

Conventional mortgage rates are tied to market conditions and your personal financial profile, including credit score, down payment, loan term, and property type. Borrowers with a 760+ credit score and 20% down generally receive the most competitive rates. Comparing multiple lenders is highly recommended.