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Conventional loans
Compare a widely used mortgage path with flexible property, occupancy, down-payment, and mortgage-insurance considerations.
Quick orientation
Who may want to explore this?
Buyers comparing flexible down-payment, mortgage-insurance, and property options.
In plain English
What this loan is
A conventional mortgage is not insured or guaranteed by FHA, VA, or USDA. Many conventional loans follow standards used by Fannie Mae or Freddie Mac, which purchase eligible mortgages from lenders and help support the broader mortgage market.
Start with the definition
Conventional does not mean 20% down
Twenty percent down can eliminate the need for -paid in many cases, but it is not a universal requirement. Certain eligible conventional purchase programs allow much smaller down payments, including options as low as 3% for qualified borrowers.
The right minimum depends on the specific program, occupancy, property type, borrower history, income limits where applicable, and the complete application. A larger may reduce the payment and improve pricing, but using every available dollar can leave too little for , repairs, and .
Understand the monthly cost
How private mortgage insurance works
, or PMI, protects the lender—not the —if a defaults. It is commonly required when a conventional purchase begins above 80% loan-to-value, meaning the loan is more than 80% of the home's value.
PMI is different from FHA . Actual PMI pricing can vary with credit profile, , loan characteristics, and insurer. The Mortgage Lab calculator labels its PMI result as an estimate so it is not mistaken for a quote.
- For many covered mortgages, a borrower may request cancellation when the scheduled balance reaches 80% of the home's original value and applicable requirements are met.
- Automatic termination generally occurs at the scheduled 78% point when the loan is current, subject to the law and loan terms.
- Investor, lender-paid, high-risk, and other loan structures can follow different rules; review the actual PMI disclosure and ask the .
Look beyond one number
What the lender evaluates
Conventional approval is based on the complete file. Credit history affects risk and pricing, while compares recurring monthly debts with qualifying income. help document the funds needed to close, and show money remaining afterward.
- Stable, documentable income and employment or business history
- Credit history, current obligations, and overall debt-to-income ratio
- , funds, and any required reserves
- Occupancy and property type, including whether the home is a , second home, or
- , , insurance, and any condominium or project review
Compare alternatives
When another path deserves a look
FHA may deserve comparison when a smaller or a different credit profile is central to the plan. Eligible veterans and service members should compare VA financing, including its lack of monthly . A first-time buyer may also want to review assistance programs without assuming assistance is automatically available.
Conventional financing can offer broad flexibility for eligible primary residences, second homes, and investment properties, but the rules and maximum financing differ by use and property type.
Potential benefits
Why someone may consider it
- Broad property and occupancy options may be available.
- may be removable under applicable rules.
Important things to know
Tradeoffs and limitations
- Pricing and eligibility depend on the complete file.
- Loan limits and program rules change.
Prepare without oversharing
Documents commonly discussed
- Recent income and employment documentation appropriate to the
- Asset statements showing funds for and
- Housing history and authorization to review credit
- Purchase contract and property information after an offer is accepted
- Additional documents for self-employment, rental income, gifts, or other applicable circumstances
Sensitive documents belong only in the external mortgage application or an approved document portal—not this website.
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Mortgage Payment Calculator
Compare , , taxes, insurance, and estimated when it may apply.
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Common questions
Questions buyers ask
Is a conventional loan the same as a conforming loan?
Not always. Conventional means the loan is not government-insured or government-guaranteed. Conforming loans are conventional loans that meet applicable Fannie Mae or Freddie Mac requirements, including loan limits. Conventional loans can also be non-conforming.
Do first-time buyers have to use FHA?
No. Eligible first-time buyers may use conventional, FHA, VA, USDA, or other applicable paths. Comparing the payment, cash needed, , and long-term cost is more useful than choosing by label alone.
Does better credit eliminate PMI?
Not by itself. Credit can affect pricing, but whether PMI is required is also tied to loan-to-value, program rules, and the chosen mortgage structure.
Primary sources
Review the official guidance
These sources support the educational summary above. Program rules and limits can change, and lender requirements may be more restrictive.
Your next step
Ready to discuss conventional loans?
Use the secure mortgage application when you want Jesse to review an individual scenario. Eligibility and final terms require verified information and lender .
