A conventional loan is a mortgage that is not insured or guaranteed by a federal government agency. Many conventional loans follow guidelines set by Fannie Mae or Freddie Mac, while others have different terms or underwriting requirements. Eligibility, costs, and available features depend on the loan, lender, property, and borrower.
Conventional financing may suit home buyers seeking a mortgage for a primary residence, second home, or—in some cases—an investment property. Buyers may use it to purchase a home or, where available and eligible, refinance an existing mortgage. The right fit depends on your finances, plans for the property, and the loan options offered.
There is no single set of credit, income, or down payment requirements for every conventional loan. Lenders typically review factors such as credit history, income and employment, existing debts, available assets, the property, and the intended occupancy. Some options may allow a smaller down payment for eligible borrowers, while other situations may call for a larger down payment or additional financial reserves.
Meeting initial criteria does not guarantee approval. Qualification and loan terms are subject to credit approval and applicable program guidelines, as well as the lender’s requirements.
Many conventional mortgages are called conforming loans because they meet applicable purchase and underwriting standards associated with Fannie Mae or Freddie Mac. Lenders may sell qualifying loans to these entities. A conventional loan that does not meet conforming requirements may be considered nonconforming; a jumbo loan is one common type, generally involving a balance above the applicable conforming loan limit.
Conforming limits are set annually and can vary based on property characteristics and location. A higher limit may apply in some areas. Loan limits are only one part of eligibility: income, credit, debt, down payment, property, and other requirements still matter. We can help you check the limits and options relevant to a specific property without assuming that a particular loan amount will be approved.
Down payment requirements vary by loan option and borrower. Some conventional programs may allow eligible buyers to put down a relatively small percentage, while other loans require more. A smaller down payment means borrowing a larger share of the home’s price and may affect the costs and terms offered.
For many conventional loans, a down payment below 20% of the home’s purchase price may mean private mortgage insurance (PMI) is required. PMI protects the lender, not the borrower. Its cost and structure depend on factors such as the loan, down payment, and borrower profile. Some loans may instead use lender-paid mortgage insurance or another structure, which can affect the loan’s pricing or terms.
For certain eligible loans with borrower-paid PMI, federal law provides cancellation protections. A borrower may generally request cancellation when the principal balance reaches 80% of the home’s original value, subject to conditions such as a written request, a satisfactory payment history, and evidence that the property has not declined in value. Automatic termination generally applies when the scheduled balance reaches 78% of original value if payments are current. Rules can differ for other loan types or insurance arrangements, so ask how PMI works for the specific loan.
Closing costs may include lender charges, appraisal and other third-party services, title-related charges, prepaid items, and initial escrow deposits where applicable. You may also choose to pay discount points to obtain different loan pricing, if that option is available. Costs vary by transaction and loan terms; review the lender’s disclosures and ask questions about any item you do not understand. Conventional loans generally do not have a government-program funding fee, but other fees and costs may apply.
Compare the full cost and features of the loan, not only the down payment or interest rate. The loan term, fees, mortgage insurance, rate-adjustment provisions, and how long you expect to keep the home may all be relevant.
Start by telling us what you are hoping to buy, how you plan to use the home, and when you expect to move. We can discuss conventional loan options, explain what documents may be needed, and outline how the application and underwriting process typically works. If you are comparing loans, ask us to explain the costs, mortgage insurance, rate structure, and estimated funds needed to close for the options you are considering.
Any discussion of eligibility or possible terms is preliminary until the lender has reviewed your application and the relevant property and loan details. All loans are subject to credit approval and applicable program guidelines. Actual costs and terms depend on your circumstances, the loan selected, lender requirements, and market conditions.