Conventional home loan guide
What is a conventional loan?
A conventional loan is a mortgage that isn't insured or backed by a government agency like the FHA, VA, or USDA. It's issued by a private lender and typically follows guidelines set by Fannie Mae or Freddie Mac.
Because there's no government guarantee attached, conventional loans put more weight on your credit profile -- but in exchange, they offer more flexibility on property type and, over time, a path to drop mortgage insurance entirely.
Why buyers choose it.
Down payments as low as 3%
You don't need 20% down to qualify.
PMI can be removed
Once you hit 20% equity, mortgage insurance can drop off.
Works for any property type
Primary homes, second homes, and investment properties.
Fixed or adjustable rates
Choose the structure that fits your timeline.
Faster closings
Fewer government-required steps can mean a quicker path to closing.
Better pricing for strong credit
Higher scores are rewarded with more competitive rates.
Top 10 questions about conventional loans
1. What is a conventional loan?
A mortgage that isn't insured or guaranteed by a government agency. It's issued by private lenders and typically follows Fannie Mae or Freddie Mac guidelines.
2. How much down payment do I need for a conventional loan?
Many buyers qualify with as little as 3% to 5% down -- not the 20% most people assume is required. A larger down payment lowers your monthly payment and can help you skip mortgage insurance altogether.
3. What is PMI and do I have to pay it?
Private Mortgage Insurance is typically required when your down payment is under 20%. It protects the lender, not you, and can usually be removed once you reach 20% equity in your home.
4. What credit score do I need for a conventional loan?
Most lenders look for a minimum around 620, though a higher score generally unlocks better rates. Borrowers with strong credit tend to see the most competitive conventional pricing available.
5. Can I use a conventional loan for any type of property?
Yes. Conventional loans can finance primary residences, second homes, and investment properties -- more flexibility than government-backed loans, which are limited to primary residences.
6. What are conforming loan limits?
These are the maximum loan amounts Fannie Mae and Freddie Mac will back in a given area. Loans within the limit are "conforming"; loans above it become jumbo loans with different guidelines.
7. Is a conventional loan better than an FHA loan?
It depends on your credit and down payment. Conventional often makes more sense for stronger credit since PMI can be removed later, while FHA mortgage insurance is harder to eliminate. FHA can fit better with lower credit or a smaller down payment.
8. How much are closing costs on a conventional loan?
Typically 2% to 5% of the loan amount, covering appraisal, title, and origination fees. Sellers can often contribute toward these costs depending on how the offer is negotiated.
9. What's the difference between fixed-rate and adjustable-rate conventional loans?
A fixed rate stays the same for the life of the loan, giving you predictable payments. An adjustable rate usually starts lower for an initial period, then shifts periodically based on market conditions.
10. How long does it take to close on a conventional loan?
Most conventional loans close in about 30 to 45 days from application to closing, though timelines vary based on file complexity and how quickly documentation comes together.