Conventional Loans

A conventional loan is any mortgage not insured or guaranteed by a government agency. Most conform to Fannie Mae and Freddie Mac standards, which is why they are also called conforming loans. For 2026 the baseline limit on a one-unit property is $832,750, and up to $1,249,125 in designated high-cost counties.

For borrowers with decent credit and some money down, conventional is usually the cheapest option over the life of the loan — mainly because its mortgage insurance comes off, and FHA's often does not.

How much do I need to put down?

Less than most people think. The 20% figure is not a requirement; it is the threshold at which mortgage insurance disappears.

• 3% is available to qualified first-time buyers through Fannie Mae's HomeReady and Freddie Mac's Home Possible programs, which also carry reduced mortgage insurance for borrowers within their income limits
• 5% is the standard conventional minimum for most other borrowers
• 20% removes private mortgage insurance entirely from day one

Between 3% and 20%, you pay PMI. The question is not whether to avoid it but how long you carry it — and that answer is usually measured in a few years, not thirty.

How does PMI actually come off?

This is the practical difference between conventional and FHA, and it is worth understanding before you choose.

Private mortgage insurance on a conventional loan is temporary. Under the Homeowners Protection Act:

• You may request cancellation once the balance reaches 80% of the original value, if you are current and the lender's conditions are met
• The servicer must automatically terminate it at 78% of original value, based on the original amortization schedule
• There is also a final termination at the midpoint of the loan term if you are current, regardless of the balance

There is a fourth route the schedule does not cover: if the property has appreciated, a new appraisal may establish 80% on current value rather than original value. Requirements vary by servicer and seasoning, but in a market that has moved, this can take PMI off years earlier than the amortization table would.

FHA works differently. If you put less than 10% down on an FHA loan, mortgage insurance generally stays for the life of the loan, and the only way out is refinancing. Over a full term, that difference is frequently larger than any rate advantage.

What credit score do I need?

Conventional pricing is more credit-sensitive than FHA. Fannie and Freddie apply loan-level price adjustments that move with credit score and loan-to-value, so the same loan costs different amounts to different borrowers.

The practical implication: a borrower in the low 600s often does better on FHA, and a borrower above roughly 700 usually does better on conventional. In the band between, it is genuinely a calculation — and it is a calculation we run, not a rule of thumb we apply.

What can I buy with one?

Conventional is the most flexible program on property type, which is the other reason it is worth considering even when a government loan is available:

• Primary residences, second homes, and investment properties
• One to four units
• Condominiums, including some that FHA has not approved
• Manufactured homes, with restrictions

VA, FHA, and USDA all require you to occupy the property. Conventional does not. For anyone buying a rental or a vacation home, it is usually the only option on the table.

What about loans above the limit?

Above $832,750 — or above your county's limit, if it is higher — you are in jumbo territory. Those are underwritten to each lender's own standards rather than Fannie and Freddie's. See Jumbo Loans.

One thing worth checking before assuming you need a jumbo: high-cost county limits go up to $1,249,125, and several of the counties we lend in qualify. A loan that would be jumbo in one county is conforming in the next one over.

Talk it through

Conventional against FHA is the most common real decision our borrowers face, and it turns on details — your score, your down payment, how long you plan to keep the loan, and whether the mortgage insurance ever comes off.

We can run both and show you the numbers side by side.

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FAQ

What is the conforming loan limit for 2026? $832,750 for a one-unit property in most of the country, rising to $1,249,125 in designated high-cost areas. The FHFA raised the baseline by $26,250 from 2025, reflecting a 3.26% increase in house prices between the third quarters of 2024 and 2025.

Can I get a conventional loan with 3% down? Qualified first-time buyers can through HomeReady or Home Possible, subject to income limits. Most other borrowers start at 5%.

Is a conventional loan better than FHA? Usually for stronger credit, because PMI comes off and FHA mortgage insurance often does not. FHA is frequently better below roughly 660. The crossover depends on your specific numbers.

Do I need 20% down to avoid PMI? To avoid it from the start, yes. But PMI is cancellable — at 80% of original value by request, automatically at 78%, and potentially sooner via a new appraisal if the property has appreciated.

Can I use a conventional loan for a rental property? Yes. Conventional is generally the only option for a non-owner-occupied purchase, since VA, FHA, and USDA all require occupancy.