The conventional loan is the workhorse of the US mortgage market. Roughly 70-80% of mortgage originations in any given year are conventional, with the rest split among FHA, VA, USDA, and non-QM products.
Conforming vs. non-conforming conventional
- Conforming — loan amount within Fannie Mae’s annually-set conforming loan limits (~$806K for single-family in 2026 baseline; up to $1.2M+ in high-cost areas). Eligible for sale to Fannie Mae or Freddie Mac. Most common conventional loan type
- Jumbo (non-conforming) — loan amount above conforming limits. Sold to private investors or held in lender portfolio. Often more stringent qualification: lower DTI caps, higher reserves, larger down payment
Typical conventional loan parameters
- Minimum down payment: 3% for first-time homebuyers (HomeReady, Home Possible programs); 5% for repeat buyers; 20% to avoid PMI
- Credit score minimum: 620+ for most lenders; 740+ for best pricing
- DTI cap: 43-50% back-end with AUS approval
- PMI: required if LTV exceeds 80%; can be removed at 80% LTV (request) or 78% LTV (automatic)
- Loan term: 15, 20, or 30 years (most common); some lenders offer 25-year and other variants
How conventional differs from FHA/VA/USDA
Conventional loans don’t require government insurance, but mortgage insurance (PMI) is required when down payment is under 20%. FHA loans require Mortgage Insurance Premium (MIP) for the life of the loan in most cases. VA loans don’t require monthly MI but charge an upfront funding fee. USDA loans charge upfront and ongoing guarantee fees. Conventional pricing is typically lower than FHA for borrowers with strong credit; FHA can be more lenient for borrowers with weaker credit or lower down payments.
