Conventional Loans Explained
Conventional loans are mortgages not backed by a government agency. They're the most common type of mortgage in the U.S. and the default option for most well-qualified borrowers.
What lenders look for
Credit score of 620 minimum, though the best rates go to scores of 740+.
Debt-to-income ratio typically under 45%.
Down payment as low as 3% for first-time buyers, though 5–20% is more common.
Documented income, assets, and a stable employment history.
Conforming vs jumbo
Conforming loans meet limits set by Fannie Mae and Freddie Mac (in 2025, $806,500 in most counties, higher in expensive markets).
Loans above that limit are jumbo loans — they have stricter requirements but allow you to finance higher-priced homes.
Mortgage insurance, the conventional way
If your down payment is less than 20%, you'll pay private mortgage insurance (PMI).
Unlike FHA, PMI on a conventional loan automatically drops off once you reach 22% equity, and you can request removal at 20%.
Key takeaways
- The default option for buyers with strong credit and steady finances.
- PMI is required under 20% down — but it goes away as you build equity.
- Conforming loan limits matter; above them, you're in jumbo territory.
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