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A conventional loan is a mortgage that is not insured or guaranteed by the federal government. Instead, it conforms to the guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that purchase mortgages from lenders. Conventional loans are the most popular mortgage product in the US, accounting for roughly 75% of all home purchase loans.

Credit Score Requirements

The minimum FICO score for a conventional loan is 620. However, your credit score significantly impacts your rate and PMI costs. At 740+, you unlock the lowest rates and may avoid LLPA (loan-level price adjustments) entirely. Between 680-740, you will get competitive pricing. Between 620-680, you will qualify but at higher rates. The sweet spot is 780+ where you get the absolute best pricing with no credit-based adjustments.

Down Payment

Conventional loans require as little as 3% down for first-time homebuyers (through Fannie Mae HomeReady or Freddie Mac Home Possible programs) and 5% for repeat buyers. However, putting less than 20% down triggers private mortgage insurance (PMI), which adds to your monthly payment. PMI typically costs 0.3% to 1.5% of the loan amount annually, depending on your credit score and LTV ratio. PMI is automatically removed once you reach 78% LTV through regular payments.

Debt-to-Income Ratio (DTI)

The maximum DTI for conventional loans is typically 45%, though some lenders approve up to 50% with strong compensating factors like high credit scores, significant reserves, or a large down payment. DTI is calculated by dividing your total monthly debt payments (including the new mortgage) by your gross monthly income. Front-end DTI (housing costs only) is generally capped at 28%, though this is flexible with automated underwriting approval.

Loan Limits

For 2026, the conforming loan limit is $806,500 in most areas and up to $1,209,750 in high-cost areas like San Francisco, New York City, and parts of Hawaii. Loans above these limits are considered jumbo loans and have different qualification requirements. The limits are adjusted annually based on home price appreciation.

Property Types

Conventional loans can be used for primary residences, second homes, and investment properties. Eligible property types include single-family homes, condos, townhomes, and 2-4 unit multifamily properties. For investment properties, expect a minimum 15% down payment and higher rates compared to primary residences.

Documentation Required

Conventional loans require standard income documentation: two years of W-2s, recent pay stubs, two months of bank statements, and two years of tax returns (for self-employed borrowers). You will also need to provide a government-issued ID, proof of assets for down payment and closing costs, and authorize a credit report.