Conventional Loans
A conventional loan is a conforming mortgage backed by Fannie Mae and Freddie Mac guidelines, with flexible terms, down payments as low as 3% for qualified buyers, and removable PMI.
- Fannie Mae & Freddie Mac guidelines
- As little as 3% down
- Removable PMI
The basics
What Is A Conventional Loan?
A conventional loan is a mortgage that is not insured or guaranteed by a government agency. Most follow the underwriting guidelines set by Fannie Mae and Freddie Mac and are a strong fit for borrowers with good credit and stable income, offering flexible terms for both home purchases and refinancing. Conventional loans generally fall into two main types:
Conforming Loans
Conforming loans stay within the conforming loan limits set by the FHFA, which are updated annually, and meet Fannie Mae and Freddie Mac guidelines.
Non-Conforming Loans
Non-conforming loans, such as jumbo loans, exceed the conforming loan limits or fall outside Fannie Mae and Freddie Mac guidelines.
- Guidelines
- Fannie Mae / Freddie Mac
- Down payment
- As little as 3%
- PMI
- Removable
How it works
Your conventional loan in four steps
From pre-approval to closing, you work with one licensed loan officer who keeps things moving.
- 01
Get pre-approved
Share your income, assets and credit. Your loan officer reviews conventional guidelines and down payment options, then issues a pre-approval letter.
- 02
Find your home
Shop with your pre-approval. After your offer is accepted, an appraisal confirms the home's value.
- 03
Underwriting
The lender reviews your file against Fannie Mae or Freddie Mac guidelines. We keep you updated and help you clear any conditions.
- 04
Close and get your keys
Review your Closing Disclosure, sign at the title company and move in.
Removable PMI
With less than 20% down, PMI applies, but it can typically be canceled once you reach enough equity.
More property types
Primary residences, second homes and investment properties may all be eligible.
Credit matters
Guidelines are stricter than government-backed loans, and stronger credit may qualify for better pricing.
Why borrowers choose conventional
Key Requirements & Benefits
A conventional loan usually asks more of the borrower than government-backed FHA, VA or USDA loans, with stricter credit score and down payment guidelines. In return, it offers real advantages, including private mortgage insurance (PMI) that can be removed once you build enough home equity.
Do you qualify?
Conventional Loan Requirements
What lenders typically look for on a conventional loan, plus the perks that come with it.
Minimum Credit Score
Most conventional loans require a minimum credit score of 620, and higher scores may qualify for better pricing.
Seller Contributions
Sellers may contribute toward your closing costs, within program limits, to help reduce your out-of-pocket expenses.
Down Payment
As low as 3% down for qualified, often first-time, homebuyers; many other buyers put down 5% or more.
Property Types
Conventional financing is available for primary residences, second homes and investment properties.
Source of Funds
Your down payment can often come from a documented gift from a relative.
Cancelable Mortgage Insurance
With less than 20% down you'll need private mortgage insurance (PMI), but you can typically request to cancel it once you reach 20% equity, lowering your monthly payment.
- Get pre-approved
Not sure you qualify?
A licensed loan officer can review your credit, income and savings and help you compare conventional, FHA and other options.
Mortgage insurance
Private Mortgage Insurance (PMI)
If you put less than 20% down on a conventional loan, you will generally need to pay private mortgage insurance (PMI). Unlike mortgage insurance on many government-backed loans, PMI on a conventional loan is usually temporary:
You may request PMI cancellation once your loan-to-value (LTV) ratio reaches 80% of the original home value (20% equity), as long as you meet the servicer's requirements. PMI is generally canceled automatically when your LTV is scheduled to reach 78%, provided your payments are current. This differs from FHA loans, where the mortgage insurance premium (MIP) can last for the life of the loan.
Get a QuoteStep 1: Under 20% down
PMI applies
Typically added to your monthly payment while your equity is below 20%.
Step 2: 80% LTV
Request cancellation
Ask your servicer to remove PMI once you reach 20% equity and meet its requirements.
Step 3: 78% LTV
Generally ends automatically
When your balance is scheduled to reach 78% of the original value, if payments are current.
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Conventional loan FAQs
A conventional loan is a mortgage that is not insured or guaranteed by a government agency. Most follow Fannie Mae or Freddie Mac guidelines.
Some conventional loans allow as little as 3% down for qualified buyers. Putting 20% down avoids private mortgage insurance (PMI).
Usually, if you put less than 20% down. PMI protects the lender and is added to your monthly payment until it is removed.
Yes. You can generally ask to cancel PMI once your balance reaches 80% of the home's original value, and it typically ends automatically at 78%, as long as you are current and meet the servicer's requirements.
It depends on your credit and down payment. Conventional PMI can be removed later, while FHA mortgage insurance often lasts for the life of the loan when you put less than 10% down; FHA can be easier to qualify for with lower credit.
Yes. Conventional loans can finance primary homes, second homes and investment properties, though down payment and credit requirements are typically stricter for second homes and rentals.