Conventional Loans

A conventional loan is a mortgage that isn’t backed by a government program (FHA, VA, USDA). Most conventional loans are “conforming,” meaning they meet Fannie Mae or Freddie Mac underwriting requirements and the applicable FHFA dollar-amount limit. Because they’re sold into the secondary market, the underwriting rules are standardized — which is generally good news for borrowers who fit the box.

When considering conventional financing, review these requirements:

• Eligible primary-residence programs allow as little as 3% down. Second homes and investment properties generally require more; the amount depends on the program, property and underwriting.

Fannie Mae’s automated underwriting system does not set a minimum credit score, while manually underwritten loans have separate score requirements.

If you’re a first-time buyer with very little down, compare conventional and FHA financing. If you have VA eligibility, compare that option too.

Program eligibility does not by itself establish lender availability. We’ll confirm which financing options are available for your property, occupancy and circumstances.

Some conventional loans allow as little as 3% down. For example, Fannie Mae has 97% LTV options for eligible one-unit primary residences, including its standard 97% option and HomeReady. The eligibility rules differ, so 3% down is not a universal conventional minimum for every borrower or property.

If your conventional loan is above 80% loan-to-value, private mortgage insurance is generally required. PMI protects the lender, not the borrower, and the cost depends on factors such as the loan-to-value ratio, credit profile and type of mortgage-insurance coverage.

One of the biggest differences from FHA is that conventional PMI does not necessarily remain for the life of the loan. On many primary-residence mortgages with borrower-paid PMI covered by the Homeowners Protection Act, you can request cancellation when the loan is scheduled to reach 80% of the home’s original value, assuming the applicable conditions are met. PMI generally terminates automatically when the scheduled balance reaches 78% of the original value if the loan is current. Servicers may also have additional cancellation options based on current value or other criteria. FHA annual mortgage insurance can last for the mortgage term or 11 years, depending on the original loan-to-value ratio.

So putting less than 20% down does not automatically make conventional financing a bad choice. A 3%, 5% or 10% down conventional loan can make sense if keeping more cash available is important, especially when the PMI cost is reasonable and there is a realistic path to removing it later.

HomeReady and Home Possible are income-limited options; other 3%-down programs have different eligibility requirements.

For 2026, the one-unit conforming loan limit is $832,750 in most counties. Higher county limits can reach $1,249,125, with different limits in certain statutory special areas. We’ll check the applicable county and property-unit limit.