Home / Conventional loans
Conventional loans: the most common mortgage
A conventional loan is a mortgage that is not insured by a government agency. Most follow guidelines set by Fannie Mae and Freddie Mac.
Who a conventional loan fits
- Borrowers with good to strong credit
- Buyers who can put 3% to 20% or more down
- Buyers of a primary home, second home or investment property
Down payment
Some conventional programs for first-time and moderate-income buyers allow as little as 3% down. Putting 20% down avoids private mortgage insurance altogether.
Private mortgage insurance (PMI)
With less than 20% down, you will usually pay PMI. Unlike FHA mortgage insurance, PMI on a conventional loan goes away:
- You can ask to cancel it once your balance reaches 80% of the home's original value and you meet the lender's requirements.
- It ends automatically when the balance is scheduled to reach 78% of the original value.
Conventional vs FHA
| Conventional | FHA | |
|---|---|---|
| Lowest down payment | 3% on some programs | 3.5% with 580+ credit |
| Mortgage insurance | PMI, removable | MIP, often long-lasting |
| Credit flexibility | Rewards higher scores | More flexible |
| Property use | Primary, second home, investment | Primary residence |
Common questions
What credit score do I need for a conventional loan?
Requirements vary by lender and program. Higher scores generally get better pricing. A lender can tell you where you stand.
Is 20% down required?
No. Some programs allow 3% down. With less than 20% down you will usually pay PMI until you reach enough equity.
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