The Most Popular Home Loan — Flexible, Competitive, and Widely Available
Conventional loans are the go-to choice for buyers with solid credit. No government backing means fewer restrictions, more property types, and competitive rates for qualified borrowers.
What Is a Conventional Loan?
A conventional loan is any mortgage not insured or guaranteed by a federal government agency. They're originated and backed by private lenders — banks, credit unions, and mortgage companies — and typically sold to Fannie Mae or Freddie Mac on the secondary market.
Because they're not government-backed, conventional loans have stricter credit and income requirements than FHA or VA loans. In exchange, borrowers with strong profiles enjoy lower overall costs, no mandatory mortgage insurance with 20% down, and flexibility to finance primary homes, vacation properties, and investment properties.
Eligibility Requirements
Minimum Credit Score
620 (660+ for best rates)
Minimum Down Payment
3% (first-time buyers) / 5% (repeat buyers)
Debt-to-Income Ratio
Up to 45–50% with compensating factors
Employment History
2 years consistent employment or self-employment
Loan Limit (2024)
$766,550 standard; up to $1,149,825 in high-cost areas
Property Types
Primary, secondary, and investment properties
Down Payment Options
First-Time Buyer (HomeReady / Home Possible)
PMI required; income limits may apply
Standard Conventional
PMI required until 20% equity is reached
Reduced PMI
Lower PMI premium; stronger approval odds
No PMI
Eliminates private mortgage insurance entirely
Key Benefits
No Upfront MIP
Unlike FHA loans, conventional loans have no upfront mortgage insurance premium — keeping your closing costs lower.
PMI Cancellable
Once you reach 20% equity, you can request PMI cancellation. FHA mortgage insurance often lasts the life of the loan.
More Property Types
Finance primary residences, vacation homes, and investment properties — FHA and VA loans are limited to primary residences.
Higher Loan Limits
Standard limits reach $766,550, with high-balance options up to $1,149,825 in high-cost NJ counties.
Flexible Terms
Choose from 10, 15, 20, or 30-year fixed terms, or adjustable-rate options like 5/1 and 7/1 ARMs.
Faster Appraisals
Conventional appraisals are typically less restrictive than FHA appraisals, which can speed up your closing timeline.
Typical Rate Factors
Rates change daily and vary by lender, credit score, loan term, and market conditions. The figures below are general guidance — connect with a local lender for a personalized rate quote.
Credit Score
Higher scores (740+) unlock the lowest available rates
Down Payment
Larger down payments reduce lender risk and often lower your rate
Loan Term
15-year loans carry lower rates than 30-year loans
Loan Type
Fixed rates offer stability; ARMs start lower but adjust after the initial period
Points
Paying discount points upfront can buy down your interest rate
Common Questions
Can I get a conventional loan with less than 20% down?
Yes. You can put as little as 3% down with programs like Fannie Mae's HomeReady or Freddie Mac's Home Possible. You'll pay PMI until you reach 20% equity, but it can be cancelled — unlike FHA mortgage insurance.
What's the difference between conforming and non-conforming conventional loans?
Conforming loans meet Fannie Mae/Freddie Mac guidelines and loan limits ($766,550 in most areas). Non-conforming loans (jumbo loans) exceed those limits and have stricter requirements.
How does PMI work on a conventional loan?
Private mortgage insurance (PMI) protects the lender if you default. It's required when your down payment is less than 20% and typically costs 0.5–1.5% of the loan amount annually. Once you reach 20% equity, you can request cancellation.
Can I use gift funds for a conventional down payment?
Yes, with conditions. For a primary residence with 20%+ down, 100% of the funds can be a gift. With less than 20% down, you may need to contribute a minimum from your own funds depending on the program.
Ready to Take the Next Step?
Connect with a licensed local lender who specializes in this program. Free pre-approval, no obligation, no hard credit pull.
Or call us at 800-206-4360