The default option, and why it’s often the cheapest over time.
Conventional loans follow Fannie Mae and Freddie Mac guidelines rather than a government agency’s. For borrowers with solid credit they usually carry the lowest long-run cost, because mortgage insurance is cancellable and pricing rewards credit and equity.
- Have a credit score in the mid-600s or higher
- Can put down 3–5% as a first-time buyer, or 5% or more otherwise
- Want mortgage insurance that goes away as you build equity
- Are buying a primary, second, or investment home
Who it may fit
Conventional financing suits most purchases and refinances where credit is reasonably strong. The first-time buyer definition is generous: no ownership interest in a primary residence in the past three years. Eligible first-time buyers can qualify with 3% down through Fannie Mae’s 97% LTV option or the income-limited HomeReady and Home Possible programs; other buyers typically start at 5%.
It’s also the main route for second homes (10% down) and investment properties (15% on one unit, 25% on 2–4 units), which FHA and VA generally don’t cover.
How it works
The loan is underwritten to agency guidelines, usually through automated underwriting (Desktop Underwriter or Loan Product Advisor). Debt-to-income ratios up to the mid-40s are common with strong compensating factors; the findings drive what documentation is required.
Below 20% down, private mortgage insurance protects the lender. You can request cancellation when the balance reaches 80% of the original value, and it terminates automatically at 78% under the Homeowners Protection Act. Lender-paid or single-premium MI are alternatives worth pricing.
Loan amounts up to the conforming limit ($832,750 baseline for 2026 in most counties confirm current limit) qualify; above that, see jumbo.
What it may help solve
- Keeping long-run cost down when your credit is strong: no upfront MI premium and cancellable monthly MI
- Buying a second home or a rental, which government programs don’t finance
- Refinancing out of FHA to drop permanent mortgage insurance once you have 20% equity
- Buying a condo or 2–4 unit with more flexible occupancy rules than FHA
Tradeoffs and eligibility
- Pricing is tiered by credit score and loan-to-value, so a 640 score pays noticeably more than a 760
- Condo projects must meet warrantability standards, which is a real hurdle in parts of South Florida (more)
- Income-limited 3%-down programs cap household income by area
- Reserves may be required for second homes, rentals, and multiple financed properties
- Seller-paid closing costs are capped at 3% of price with less than 10% down, 6% with 10–25%
What you may need
- Photo ID
- 30 days of pay stubs; W-2s for two years
- Two years of tax returns if self-employed, commissioned, or using rental income
- Two months of bank statements, all pages, with large deposits explained
- Gift letter and transfer evidence if using gift funds
- Condo questionnaire, budget, and insurance (obtained from the association)
- Current lease and proof of rent received for rental income
Common questions
Is 20% down required?
How does PMI go away?
Conventional or FHA for me?
Can I use gift funds?
What’s a conforming loan?
Related options
Talk through whether conventional is the right fit.
Tell Jared what you’re buying or refinancing and roughly where your credit and down payment stand.
- No credit pull, no obligation
- Not an application; no guarantee of approval or terms
- Rather talk? Call or text 954-649-0020
Strong credit should be rewarded. Let’s make sure it is.
Jared can price conventional against the alternatives for your scenario.