What is a conventional mortgage?

A conventional mortgage is a home loan that is not insured or guaranteed by the federal government. Unlike FHA, VA, or USDA loans, conventional loans are backed by private lenders and follow guidelines set by Fannie Mae and Freddie Mac. Most conventional loans require a credit score of at least 620 and a down payment of 3–20%. In 2026, the conforming loan limit for a single-family home is $806,500 in most US counties.

What credit score do you need for a conventional mortgage?

The minimum credit score for a conventional mortgage is 620. However, to get the best interest rates, most lenders want a credit score of 740 or higher. Borrowers with scores below 680 will pay higher rates and may face additional requirements. Credit score affects both loan approval and the PMI rate if your down payment is less than 20%.

What is the minimum down payment for a conventional loan?

The minimum down payment for a conventional mortgage is 3% for first-time homebuyers through programs like Fannie Mae's HomeReady and Freddie Mac's Home Possible. Most repeat buyers must put down at least 5%. Putting down less than 20% requires private mortgage insurance (PMI), which adds 0.5%–1.5% of the loan amount per year to your payment.

What is the 2026 conforming loan limit for conventional mortgages?

The 2026 conforming loan limit for a single-family home is $806,500 in most US counties (baseline). High-cost areas — including parts of California, New York, Hawaii, and Alaska — have limits up to $1,209,750. Loans above the conforming limit are called jumbo loans and typically require higher credit scores, larger down payments, and carry slightly higher interest rates.

When does PMI end on a conventional mortgage?

Private mortgage insurance (PMI) on a conventional mortgage automatically cancels when your loan-to-value ratio reaches 78% of the original purchase price — meaning you've paid off enough principal. You can also request cancellation at 80% LTV by contacting your lender and providing evidence of current home value. Under the Homeowners Protection Act, lenders must cancel PMI at 78% LTV automatically.

Conventional Mortgage: Requirements, Down Payment, and How It Works (2026)

A conventional mortgage is the most common type of home loan in the US — about 70% of all purchase mortgages are conventional. Unlike government-backed loans (FHA, VA, USDA), conventional loans are not insured by the federal government, which means lenders take on more risk and set stricter qualification standards. In exchange, borrowers avoid some fees and restrictions that come with government programs.

Conventional vs. Government-Backed Mortgages

Feature	Conventional	FHA	VA	USDA
Government-backed	No	Yes	Yes	Yes
Min. credit score	620	500–580	None (VA)	640 typically
Min. down payment	3%–5%	3.5%	0%	0%
Mortgage insurance	PMI (if < 20% down)	MIP always	Funding fee	Guarantee fee
Loan limits (2026)	$806,500	$524,225	None	Geographic income limits
Who qualifies	Most borrowers	Lower credit OK	Veterans/active military	Rural areas

2026 Conventional Loan Limits

Property Type	Baseline Limit	High-Cost Limit
Single-family home	$806,500	$1,209,750
2-unit property	$1,032,650	$1,548,975
3-unit property	$1,248,150	$1,872,225
4-unit property	$1,551,250	$2,326,875

Loans above these limits are jumbo loans — they require higher credit scores (typically 720+) and larger down payments (10–20%).

Down Payment Requirements

Down Payment	PMI Required?	Notes
3%	Yes	First-time buyers only (HomeReady, Home Possible)
5%	Yes	Standard minimum for repeat buyers
10%	Yes	PMI rate decreases
20%	No	No PMI required
20%+	No	Best rates, no additional fees

Private Mortgage Insurance (PMI) Costs

PMI protects the lender — not you — if you default. Rates vary by credit score and down payment:

Credit Score	PMI Annual Rate (5% down)
760+	0.17%–0.33%
720–759	0.33%–0.50%
680–719	0.50%–0.83%
640–679	0.83%–1.20%
620–639	1.20%–1.50%

Example: On a $400,000 loan with 5% down and a 720 credit score:

PMI rate: ~0.5%/year = $2,000/year = ~$167/month added to your payment

When PMI ends: Automatically at 78% LTV; you can request removal at 80% LTV.

Qualifying for a Conventional Mortgage

Credit Score Impact on Rate

Credit Score	Approximate Rate Premium vs. Best (2026)
760+	Base rate
740–759	+0.125%
720–739	+0.25%
700–719	+0.50%
680–699	+0.75%
660–679	+1.0%+
640–659	+1.5%+
620–639	+2.0%+

Debt-to-Income (DTI) Requirements

Maximum DTI: 45% for most conventional loans; up to 50% with compensating factors
Ideal DTI: Below 36%
Front-end ratio: Housing costs typically should not exceed 28% of gross income

Income and Asset Requirements

2 years of W-2 income or 2 years of tax returns (self-employed)
Bank statements showing cash reserves (typically 2 months’ PITI)
Employment verification

Fixed vs. Adjustable Rate Conventional Loans

Loan Type	2026 Rate Range	Best For
30-year fixed	6.5%–7.5%	Long-term owners, budget predictability
15-year fixed	5.8%–6.8%	Faster payoff, less total interest
5/1 ARM	5.5%–6.5%	Planning to sell or refinance within 5 years
7/1 ARM	5.7%–6.7%	Medium-term horizon

Conventional Loan Programs for Low Down Payments

Program	Sponsor	Min. Down	Who Qualifies
HomeReady	Fannie Mae	3%	Low-to-moderate income, first-time or repeat buyer
Home Possible	Freddie Mac	3%	Low-to-moderate income, first-time or repeat buyer
Standard conventional	Fannie/Freddie	5%	All credit-qualified borrowers
HomeOne	Freddie Mac	3%	First-time buyers only

Conventional loans are underwritten to Fannie Mae and Freddie Mac standards — your loan-to-value ratio (LTV) determines whether PMI is required and at what cost. Self-employed borrowers who can’t use standard income documentation may need a bank statement loan instead. Use the mortgage payment calculator to compare monthly costs at different down payment levels.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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