At a Glance
- Down payment as low as 3-5%
- Minimum credit score of 620+
- Best for borrowers with good credit (620+) and stable income
Conventional loans are the most popular type of mortgage, offering competitive rates and flexible terms for qualified borrowers. Unlike government-backed loans, conventional mortgages are not insured by federal agencies, which often means stricter qualification requirements but potentially lower costs for those who qualify.
Who Should Consider a Conventional Loan?
Conventional loans are ideal for borrowers with good to excellent credit scores (typically 620 or higher), stable income, and the ability to make a down payment. If you have a strong financial profile, you may qualify for better interest rates than government-backed alternatives. These loans work well for primary residences, second homes, and investment properties.
Down Payment Options
While 20% down is often cited as the standard, many conventional loan programs allow down payments as low as 3% for first-time homebuyers. However, putting down less than 20% typically requires private mortgage insurance (PMI), which adds to your monthly payment until you build sufficient equity in your home.
Loan Limits and Terms
Conventional loans have conforming loan limits set by the Federal Housing Finance Agency (FHFA). For 2024, the baseline limit is $766,550 in most areas, with higher limits in expensive markets. You can choose from various term lengths, with 30-year and 15-year fixed-rate mortgages being the most common options.
Eligibility Requirements
- Minimum credit score of 620 (higher scores get better rates)
- Debt-to-income ratio typically below 43-45%
- Stable employment history (usually 2+ years)
- Down payment of 3-20% depending on the program
- Private mortgage insurance if down payment is less than 20%
Frequently Asked Questions
What's the difference between conventional and FHA loans?
Conventional loans typically require higher credit scores and larger down payments but often have lower overall costs for qualified borrowers. FHA loans are more accessible but include mortgage insurance for the life of the loan.
Can I remove PMI from a conventional loan?
Yes! Once you reach 20% equity in your home, you can request PMI removal. It's automatically removed at 22% equity.
Are conventional loans only for primary residences?
No, conventional loans can be used for primary residences, second homes, and investment properties, making them very versatile.