Loan programs
Conventional loans
The default choice for most buyers. Not government-backed, so the rules stay the same from lender to lender. And the mortgage insurance eventually stops.
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At a glance
- Credit scoreAround 620Lenders often want more
- Down paymentFrom 3%On some first-time buyer programs
- Mortgage insurancePMI below 20% downCancellable as equity builds
- Loan limitConforming limit appliesSet each year by the FHFA
Conventional in numbers
What the programme actually requires
PMI cancellation rules explained by the CFPB.
A conventional loan is any mortgage not insured by the government. Most follow rules set by Fannie Mae and Freddie Mac, so lenders can sell them on after closing.
That is why the rules barely change from lender to lender. It is also why most buyers end up here.
Loan program
Conventional at a glance
The default choice for most qualified buyers
Example only
- You build equity
- Loan balance
The requirements
What you need to qualify
| Requirement | Typical minimum | Worth knowing |
|---|---|---|
| Credit score | Around 620 | Some lenders want 640 or higher |
| Down payment | 3% to 20% | Below 20% means PMI |
| Debt-to-income | Up to 45% | Can stretch to 50% with reserves or a strong score |
| Reserves | Varies | More often required on higher loan amounts |
| Loan amount | Up to the conforming limit | Above it becomes a jumbo loan |
Scroll sideways to see all columns.
These are the lowest a program allows. Lenders often want more. That is called an overlay. Compare all five programs →
The detail
What makes this program different
PMI ends, and that is the point
You pay PMI if you put down less than 20 percent. Ask to cancel it at about 20 percent equity. It drops off on its own at 22 percent. An FHA borrower keeps paying that money for years.
Three percent down exists
Some first-time buyer programs go as low as 3 percent down. A few have income caps. Ask about them rather than assuming you need 20 percent.
Better rates at higher scores
Your rate moves in steps with your credit score and your down payment. Twenty points of score can change your payment for thirty years.
Sellers often prefer it
On a house needing work, conventional appraisals check condition less strictly than FHA or VA. In a bidding war that can matter.
Honestly
Is a conventional loan right for you?
Good fit if
- Your credit is around 620 or better
- You want mortgage insurance you can eventually cancel
- You are buying a property that might struggle a stricter appraisal
- You can reach 20 percent down and skip insurance entirely
Look elsewhere if
- Your score is below 620, where FHA usually works better
- You have served in the military and qualify for VA at zero down
- The property is in a USDA eligible area and you have nothing to put down
- The price is above the conforming limit for your county
Being honest
When a conventional loan is the wrong choice
It is the default recommendation, and the default is not always right.
Your credit score is below 620
Conventional pricing punishes lower scores heavily before it declines you outright. FHA allows 580 with 3.5 percent down and prices it more evenly.
You have a recent blemish
A collection, a late run or a short credit history can pass FHA underwriting where conventional will not look past it.
Your debt-to-income sits above 45 percent
Conventional can stretch to 50 percent with strong reserves, but FHA is generally more flexible on the ratio itself.
The exit
When PMI actually stops
Private mortgage insurance is the main running cost of a conventional loan below 20 percent down, and unlike FHA it has a defined end.
You can request cancellation once you reach roughly 20 percent equity, based on the original value. It falls away automatically at 22 percent. Paying down principal faster, or a rise in local values confirmed by an appraisal, both bring that date forward.
That single difference is why conventional usually costs less over a long hold than FHA does, even when the rate looks similar. See the full comparison.
- 1You put down less than 20 percentPMI applies from the start.
- 2You pay down, or values riseBoth bring the cancellation date forward.
- 3You reach 20 percent equityAsk to cancel. It drops off on its own at 22.
Questions
Common questions
What credit score do you need for a conventional loan?
Most lenders look for around 620, though some want 640 or higher. Pricing improves as your score rises, so the difference between 660 and 740 shows up in your monthly payment, not just in whether you are approved.
How much do you need to put down on a conventional loan?
As little as 3 percent on some first-time buyer programs, and 5 percent is common otherwise. Anything below 20 percent means private mortgage insurance until you build enough equity.
When does PMI go away on a conventional loan?
You can request cancellation once you reach roughly 20 percent equity, and it terminates automatically at 22 percent based on the original schedule. This is the main cost advantage over FHA.
What debt-to-income ratio do conventional loans allow?
Up to about 45 percent commonly, stretching toward 50 percent with compensating factors such as cash reserves or a high credit score.
Is a conventional loan better than FHA?
It usually costs less over time because the insurance ends. FHA is easier to qualify for. If your credit clears 620 comfortably, conventional is normally the cheaper long-run choice.
Keep reading
Related guides
FHA loans
Lower credit bar, but insurance that usually stays.
Jumbo loans
What happens above the conforming limit.
Credit requirements
What score you need, by program.
Independent sources
- Consumer Financial Protection Bureau — private mortgage insurance and when it can be cancelled
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