Reviewed by Jeff Shin, NMLS #1041652. Updated .

Conventional loan requirements

  • Down payment. Fannie Mae and Freddie Mac allow as little as 3% down on eligible loans, including HomeReady and Home Possible. Second homes and investment properties need more. See HomeReady checks and Home Possible checks.
  • Credit. Fannie Mae removed its fixed 620 minimum for loans run through its Desktop Underwriter system in November 2025 and now weighs the whole credit file. Many lenders still set their own minimum, and your score changes the price. More on credit scores by loan type.
  • Debt-to-income. Automated underwriting weighs your debt-to-income ratio together with credit, savings, and down payment. A stronger file can carry a higher ratio.
  • Property. Conventional loans can finance a primary home, a second home, or an investment property, from one to four units. FHA covers primary residences only.

Conforming loan limits

A conventional loan that fits Fannie Mae and Freddie Mac rules is called a conforming loan. The Federal Housing Finance Agency sets the maximum conforming loan amount each year, with higher limits in designated high-cost counties. Above the limit for your county, the loan is a jumbo loan, which follows different rules and pricing.

Private mortgage insurance (PMI)

With less than 20% down, a conventional loan carries private mortgage insurance. Unlike FHA mortgage insurance, PMI does not have to last for the life of the loan. Under the Homeowners Protection Act, you can ask to cancel PMI once your balance reaches 80% of the home’s original value, and it ends automatically at 78% if your payments are current. That is a big reason conventional often costs less over time than FHA for borrowers with good credit. More in PMI checks before an offer.

Conventional mortgage rates

Conventional rates are priced off the Fannie Mae and Freddie Mac pricing grids. Your credit score, down payment, property type, and loan purpose each add or subtract a pricing adjustment, which is why two borrowers on the same day can see different rates. Points and lender credits move the rate further. Start from the weekly 30-year and 15-year benchmark, then compare quotes on the same structure.

Conventional vs. FHA

FHA tends to fit lower credit scores and higher debt-to-income ratios. Conventional tends to win with stronger credit, because the mortgage insurance is cheaper and can come off later. The only reliable way to know is to price both on the same house: FHA vs. conventional and the payment side by side at the same price.

Conventional loans for investment property and second homes

Conventional financing is the usual route for a second home or a rental when your tax returns show the income. It takes a larger down payment and prices higher than a primary home. If write-offs hide your income, a DSCR loan qualifies on the property’s rent instead: DSCR vs. conventional for investment property.

Questions borrowers ask

What is a conventional loan?

A conventional loan is a mortgage that no government agency insures or guarantees. Most conventional loans follow rules set by Fannie Mae and Freddie Mac, which buy them from lenders.

What credit score do I need for a conventional loan?

Fannie Mae removed its fixed 620 minimum for loans run through its Desktop Underwriter system in November 2025 and now weighs the whole credit file. Many lenders still set their own minimum, and a higher score lowers the price.

How much do I need to put down on a conventional loan?

Fannie Mae and Freddie Mac allow as little as 3% down on eligible loans, including HomeReady and Home Possible. Second homes and investment properties need a larger down payment.

When does PMI come off a conventional loan?

Under the Homeowners Protection Act, you can ask to cancel PMI when your balance reaches 80% of the home's original value, and it ends automatically at 78% if your payments are current.

Is a conventional loan better than an FHA loan?

It depends on your credit and down payment. Conventional often costs less for borrowers with strong credit because PMI is cheaper and can be removed. FHA often fits lower scores and higher debt-to-income ratios. Pricing both on the same house is the fastest way to know.

Sources

Program rules on this page are summarized from the agencies that set them. Lenders can add stricter requirements. Checked October 7, 2026.

Related

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