What is a conventional loan?
A conventional loan is a mortgage that isn't backed by a government agency like the FHA, VA, or USDA. Instead, it's backed by private lenders and follows guidelines set by Fannie Mae and Freddie Mac.
If that sounds complicated, here's the simple version: conventional loans are the standard mortgage most homebuyers use. They offer competitive interest rates, flexible term lengths (15, 20, or 30 years), and one of the biggest advantages in all of mortgage lending — the ability to cancel private mortgage insurance (PMI) once you reach 20% equity.
As an independent broker, I don't work for one bank. I compare conventional loan products from multiple lenders to find the combination of rate, fees, and terms that works best for your specific situation. That's something a single bank simply can't do.
Why choose a conventional loan?
Competitive interest rates
Conventional loans typically offer some of the lowest interest rates available, especially for borrowers with good credit. And because I shop across multiple lenders, I can find rates that are often better than what you'd get walking into one institution.
Cancel PMI at 20% equity
Unlike FHA loans, which carry mortgage insurance for the life of the loan, conventional loans allow you to remove PMI once your equity reaches 20%. That can save you hundreds of dollars per month down the road.
Flexible down payment options
While 20% down is ideal, it's not required. Conventional loans are available with as little as 3% down for qualified buyers — though you'll pay PMI until you reach that 20% mark.
Versatile property types
Conventional loans work for primary residences, second homes, and investment properties. They're also available for single-family homes, condos, townhomes, and multi-unit properties (up to 4 units).
Loan amounts up to $832,750
For 2026, the conforming loan limit is $832,750 in most areas (higher in designated high-cost counties). If you need more than that, we'd look at a jumbo loan.
Conventional vs. other loan types
| Feature | Conventional | FHA | VA |
|---|---|---|---|
| Down Payment | As low as 3% | 3.5% | 0% |
| Credit Score | Typically 620+ | 500+ (580 for 3.5% down) | Varies by lender |
| Mortgage Insurance | PMI until 20% equity, then removable | MIP for life of loan | No PMI (funding fee instead) |
| Loan Limits (2026) | $832,750 (most areas) | $541,287 (floor) | No limit (full entitlement) |
| Property Types | Primary, second home, investment | Primary residence only | Primary residence only |
| Seller Concessions | 3-6% of purchase price | 6% of purchase price | Up to 4% |
A conventional loan might be right for you if...
- •You have good credit (620+). The better your credit, the better your rate. Borrowers with scores above 740 typically get the most competitive conventional pricing.
- •You want to avoid lifelong mortgage insurance. Unlike FHA loans, PMI on a conventional loan goes away once you hit 20% equity — either through payments, appreciation, or a combination.
- •You're buying a second home or investment property. Government-backed loans are limited to primary residences. Conventional loans cover all property types.
- •You have a stable income and employment history. Conventional underwriting looks at 2 years of W-2s or tax returns. If your income is straightforward, conventional is usually the simplest path.
- •You're putting 20% or more down. With 20% down, you skip PMI entirely — which means a lower monthly payment from day one.
What you should know about conventional loans
Down payment: As low as 3% for first-time buyers through Fannie Mae's HomeReady or Freddie Mac's Home Possible programs. Standard conventional loans require 5% minimum. 20% avoids PMI entirely.
Credit requirements: Most lenders require a minimum score of 620, though you'll need 740+ to access the very best rates. I'll review your credit with you and let you know exactly where you stand.
Debt-to-income ratio (DTI): Conventional loans typically cap DTI at 45%, though some lenders allow up to 50% with strong compensating factors like high reserves or excellent credit.
Private mortgage insurance (PMI): Required when your down payment is less than 20%. PMI typically costs 0.5%–1% of your loan amount per year. The good news: you can request removal once your equity hits 20%, and it automatically cancels at 22%.
Loan terms: Available in 10, 15, 20, 25, and 30-year fixed terms, as well as adjustable-rate options (ARMs). I'll help you weigh the monthly payment vs. total interest trade-off for each option.
Conforming loan limits (2026): $832,750 for single-family homes in most areas. Some high-cost counties go up to $1,249,125. If your purchase exceeds these limits, we'd explore jumbo loan options.
The conventional loan process with Jeff
Free consultation
We talk about your goals, your timeline, your finances, and what kind of monthly payment you're comfortable with. No paperwork needed for this step — just a conversation.
I shop the market
I compare conventional loan products from multiple lenders — rates, fees, lender credits, and program features. You see the options side by side and choose what fits.
Pre-approval
Once we settle on a direction, I get you pre-approved. This tells sellers you're serious and gives you a clear budget for your home search.
Underwriting & processing
My team (including Tania, my loan coordinator) handles the document collection and lender communication so you're not chasing paperwork on your own.
Closing day
You sign with confidence, knowing you got the best rate available — not just the one rate your bank happened to offer.