- Conventional loans follow national guidelines rather than a government insurance program.
- They work for primary homes, second homes and investment properties.
- Mortgage insurance only applies above 80% loan-to-value, and it can come off later.
What a conventional loan is
Any mortgage not backed by FHA, VA or USDA. Loans that fit the national guidelines and the yearly size limits are called conforming; bigger loans are jumbo.
Each lender adds its own rules on top of the national guidelines. That's why shopping your file across many lenders matters, especially if something about it is a little unusual.
Who it fits
- Buyers with steady, documentable income and fair-to-strong credit.
- First-time buyers who can use a 3% down option.
- Second-home and rental property buyers.
- Homeowners refinancing to lower a rate, shorten a term, or drop FHA mortgage insurance.
Conventional loan parameters
| Conventional | |
|---|---|
| Loan limit | Set yearly by FHFA by county; higher in high-cost areas |
| Credit score | No fixed minimum on automated approvals; 620 for manual underwriting; lender floors vary |
| Down payment, primary | 3% for first-time or low-down-payment program buyers; 5% otherwise |
| Down payment, second home | 10% |
| Down payment, investment | 15% on one unit; 25% on 2 to 4 units |
| Mortgage insurance | Above 80% LTV; removable at 80% on request, automatic at 78% |
| Rate-and-term refinance | Up to 95% LTV on a one-unit primary home |
| Cash-out refinance | Up to 80% LTV one-unit primary, 75% one-unit rental; 6 months on title |
| Debt-to-income | Up to 50% with automated approval |
| Terms | 10- to 30-year fixed and adjustable-rate options |
| After credit events | 4 years after Chapter 7; 7 years after foreclosure (less with extenuating circumstances) |
Guidelines change and lenders may add overlays. Subject to approval.
What to expect
- Pre-approval: credit, income and assets reviewed up front so your offer is strong.
- Contract and appraisal (some files qualify for an appraisal waiver).
- Underwriting and conditions.
- Closing, typically about 30 days from contract.
The trade-offs
- Credit score has a bigger effect on price than it does on FHA or VA.
- Lower down payments mean mortgage insurance until you reach about 20% equity.
- Recent credit events take longer to season than on FHA.
Frequently asked questions
Do I need 20% down?
No. Eligible buyers can put as little as 3% down on a primary home. Under 20% down means mortgage insurance until you build enough equity.
How do I remove PMI?
You can ask to cancel at 80% of the original value if you're current, and it drops automatically at 78%. Rising values can get you there sooner with a new appraisal, subject to the servicer's rules.
Can I use a conventional loan for a rental?
Yes, with 15% down on a one-unit rental or 25% on two to four units.
Related loan programs
Learn more
Rates and program availability vary by state, property and lender. This is not a rate quote, a credit decision, an offer or a commitment to lend. Program restrictions apply. Larz Martin NMLS #2026245 · CA DRE #02241936 · Lumin Lending, Inc. NMLS #2716106 · CA DRE #02291443. Equal Housing Opportunity.
