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Loan program
Conventional home loans.
The most common mortgage in the country. With good credit it is often the lowest-cost way to buy, and its mortgage insurance does not last forever.
3%
minimum down
620
typical minimum score
20%
down, no PMI
1-4
unit homes
What a conventional loan is
A conventional loan is any mortgage that is not insured by a government agency like the FHA, VA or USDA. Most follow guidelines set by Fannie Mae and Freddie Mac, which is why they are also called conforming loans.
They come as 30-, 20-, 15- or 10-year fixed rates, or as adjustable rates, and they work for a home you live in, a second home or a rental.
Who it fits
- Buyers with a credit score of 620 or higher, and especially 700 and up.
- First-time buyers who have saved at least 3%.
- Anyone putting 20% down who wants to skip mortgage insurance.
- Buyers of second homes and investment properties.
The basic requirements
| Requirement | What to expect |
|---|---|
| Down payment | 3% for first-time buyers and some income-based programs, commonly 5%. More for second homes and rentals. |
| Credit score | Usually 620 or higher, with better pricing as your score climbs. |
| Debt-to-income | Often up to about 45% of your income before taxes, sometimes higher with a strong file. |
| Loan amount | Up to the conforming limit set for your county each year. Above it, the loan is a jumbo loan. |
| Property | 1 to 4 units: homes you live in, second homes and investment properties. A condo complex must meet conventional guidelines. |
| Mortgage insurance | Required under 20% down, and it does not last for the life of the loan. |
These are typical guidelines from Fannie Mae and Freddie Mac. Lenders can add their own on top.
Mortgage insurance that comes off
Put less than 20% down and you pay private mortgage insurance, usually as part of your monthly payment. Unlike FHA, it has an exit:
- At 20% equity you can ask to have it removed, based on your original home value and a good payment history.
- At 22% equity it ends automatically as you pay down the loan.
Your credit score and down payment set how much it costs, which is one reason a few extra points on your score can lower your payment.
Conventional or FHA?
With strong credit, conventional is often cheaper over time. With a lower score or more debt, FHA can come out ahead. Here is how they compare.
| Conventional | FHA | |
|---|---|---|
| Minimum down | 3% for some first-time buyers, commonly 5% | 3.5% with a 580 score |
| Credit score | Usually 620 or higher | From 580 for 3.5% down |
| Mortgage insurance | Only under 20% down, and it comes off | Upfront and annual, often for the life of the loan |
| Property types | Primary, second homes and rentals | Primary residence only |
| Often the better fit | Stronger credit, especially with more down | Lower scores or more debt |
I wrote more about this choice in FHA or conventional: which loan fits you?, and the FHA program page covers the other side.
Down payment help
Conventional loans can pair with California down payment assistance, including CalHFA programs. Some programs help with the down payment and some with closing costs. Rules and funding change through the year, so ask me what is open right now.
Common questions
Conventional loans, answered.
You can ask once you reach 20% equity based on your original home value, as long as your payments are current. It ends automatically at 22%. If your home has gone up in value, a new appraisal can sometimes get you there sooner.
More than for a home you live in. Commonly 15% for a single-unit rental and 25% for a 2 to 4 unit property, depending on the loan.
Yes, for a home you will live in. Gifts from family need a signed gift letter and a paper trail. The rules are tighter for second homes, and gifts cannot be used for investment properties.
The largest loan Fannie Mae and Freddie Mac will buy, set each year by county. Los Angeles County has one of the higher limits. Loans above it are jumbo loans, with their own guidelines.
It comes with a higher monthly payment but usually a lower rate and far less total interest. If the payment fits comfortably, it can save a lot. If not, a 30-year loan with extra payments keeps your options open.
Next step
See if conventional fits you.
A one-minute quote request is enough for me to compare conventional with your other options. Nothing here affects your credit.