Conventional loans are mortgages not insured or guaranteed by the federal government — most are sold to Fannie Mae or Freddie Mac. They’re the default mortgage for borrowers with strong credit and stable documented income. Conventional wins long-term over FHA because the PMI is removable at 20% equity, unlike FHA’s lifetime MIP. We work conventional purchases (3% down for first-time buyers, 20% down to avoid PMI entirely), refinances, second homes, and investment properties. Lending in 49 states. New York excluded.
No SSN required. No credit pull. Takes about 2 minutes.
What conventional actually is
A conventional loan is a mortgage that’s not insured or guaranteed by the federal government — not FHA, VA, or USDA. Most conventional loans are “conforming,” meaning they meet Fannie Mae and Freddie Mac’s purchase criteria and can be sold to those agencies. Some conventional loans exceed those limits and become “jumbo.”
It’s the most flexible loan category in terms of property types, occupancy options, and program variations. The trade-off is stricter credit and income standards than FHA — but better long-term economics for borrowers who qualify.
Who conventional is for
Borrowers with 620+ credit and clean income
The standard W-2 borrower with reasonable credit and reasonable down payment. Conventional is the default. Strong credit (740+) unlocks the best rates and lowest PMI.
First-time homebuyers using HomeReady or Home Possible
3% down conventional programs designed for first-time and lower-income buyers. Income limits apply (typically 80% of area median income), but reduced PMI rates make them more affordable than standard conventional at the same low down payment.
Second home and investment property buyers
Government loans (FHA, VA, USDA) require primary residence. Conventional is the only government-supported path for second homes and investment properties — 10% down minimum for second homes, 15-25% for investment.
FHA-to-conventional refinancers
Anyone who started with FHA and has built up to 20% equity. Refinancing to conventional drops the FHA MIP entirely — often saving hundreds per month for the rest of the loan term.
Conventional at a glance
2026 conforming loan limits
$832,750 baseline for a one-unit property in most counties (up from $806,500 in 2025). $1,249,125 in high-cost counties (the ceiling). Above $1,249,125, loans become jumbo.
Credit score
620+ is the Fannie/Freddie minimum. Below 620 you’d route to FHA. 740+ is where conventional pricing and PMI really shine.
Down payment
3% for first-time buyers via HomeReady or Home Possible. 5% standard for most other first-time and repeat buyers. 10% minimum for second homes. 15-25% for investment properties. 20% to skip PMI entirely on primary residence.
PMI
Required below 20% down. Automatically drops at 78% LTV based on original purchase price. Removable on request at 80% LTV with new appraisal. The PMI removal advantage is the biggest long-term economics difference vs FHA.
DTI
Up to 50% routinely on automated underwriting (DU or LPA) with appropriate credit and reserves. Manual underwriting tighter.
Property types and occupancy
1-4 unit residential, primary residence, second home, or investment property. Single-family, townhomes, planned-unit developments, warrantable condos, and manufactured homes meeting MH Advantage or CHOICEHome standards.
Conventional programs we work
Conventional Purchase
The standard Fannie or Freddie conventional purchase loan. Primary residence, second home, or investment property. 3-20% down depending on credit, occupancy, and program.
HomeReady and Home Possible
Fannie Mae’s HomeReady and Freddie Mac’s Home Possible — 3% down conventional with reduced PMI for first-time and lower-income buyers. Income limits typically 80% of area median income. Homebuyer education required.
Rate-and-Term Refinance
Refinance to improve your rate or change your loan term without taking cash out. Common when rates drop or when refinancing from FHA to drop the lifetime MIP.
Cash-Out Refinance
Pull equity out of your home. Up to 80% LTV on primary residence. Useful for debt consolidation, home improvements, or accessing equity without a separate HELOC.
High-Balance Conforming
Conventional loans in high-cost counties with loan amounts between $832,750 and $1,249,125. Still conforming (Fannie/Freddie can buy them), with slightly different pricing.
HomeStyle and CHOICERenovation
Conventional renovation loans (Fannie’s HomeStyle, Freddie’s CHOICERenovation). Finance purchase or refinance plus renovation in one loan, similar to FHA 203(k) but generally more permissive on what counts as eligible renovation work.
Where conventional fits vs other loans
Conventional vs FHA
Conventional wins long-term: PMI removable at 20% equity, lower lifetime cost. FHA wins short-term: easier credit, smaller down payment with weaker credit. Strong credit (680+) typically goes conventional. Weaker credit starts with FHA and refinances to conventional once equity builds.
Conventional vs VA
For veterans with full VA entitlement: VA almost always wins (0% down, no monthly MI). Conventional wins for veterans without remaining entitlement or for non-veteran scenarios.
Conventional vs jumbo
Below $832,750 ($1,249,125 in high-cost counties) — conventional wins on easier underwriting and lower rates. Above those limits, jumbo is the only path for a documented loan. Borrowers just above the conforming limit sometimes put more cash down to stay conforming.
Conventional vs non-QM
Conventional wins when income is clean W-2 or tax-return-supported. Non-QM (bank statement, 1099, P&L, asset depletion) wins when tax returns don’t tell your full income story — self-employed with write-offs, 1099 contractors, asset-rich borrowers without monthly income.
What working with us looks like
Conventional underwriting runs through Fannie Mae’s Desktop Underwriter (DU) or Freddie Mac’s Loan Product Advisor (LPA). We run files through both automated underwriting engines and pick whichever path delivers the better approval — sometimes a file qualifies under one engine but not the other.
For self-employed borrowers, we know when conventional full-doc qualifies you for the price you need — and when a non-QM path delivers more qualifying income because your write-offs are killing the tax-return calculation.
Common questions
Quick answers below. For the full set — PMI mechanics, gift fund rules, DTI calculations, the FHA-to-conventional refinance play, the application process step by step — visit the Conventional Loans FAQ.
What’s the 2026 conforming loan limit?
$832,750 baseline in most counties (up from $806,500 in 2025). $1,249,125 in high-cost counties.
Can I do 3% down conventional?
Yes — through HomeReady (Fannie) or Home Possible (Freddie). Income limits apply (typically 80% of area median income), and homebuyer education is required.
When does conventional PMI go away?
Automatically at 78% LTV based on the original purchase price. Removable on request at 80% LTV with a new appraisal showing current value.
Can I use a conventional loan for an investment property?
Yes. Typically 15-25% down depending on loan amount and credit. Up to 10 financed properties allowed under Fannie’s investor policy.
About this page: Written by J.D. Peck, NMLS #314883, Area Manager and Mortgage Loan Originator at Paramount Residential Mortgage Group (PRMG), NMLS #75243. 25+ years of mortgage lending experience, 3,100+ loans closed, Scotsman Guide Top Originator 2026. Built from current Fannie Mae Selling Guide and Freddie Mac Single-Family Seller/Servicer Guide, plus 2026 FHFA conforming loan limits. Lending in 49 states. New York excluded. Last updated September 1, 2026.
What are you looking to do?
No SSN required. No credit pull. Takes about 2 minutes.
First-Time Buyer in Colorado?
Two Colorado programs pair with a conventional loan and can put up to $25,000 toward your purchase — and you do not always have to be a first-time buyer. See Colorado first-time buyer assistance programs.