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Conventional Loans: Best Rates for Strong Borrowers
Conventional mortgages offer the lowest long-term costs for borrowers with good credit and
a solid down payment. PMI is removable once you reach 20% equity
unlike FHA's permanent MIP.
What Is a Conventional Loan?
A conventional loan is any mortgage not backed by a government agency (FHA, VA, or USDA). Most conventional loans conform to guidelines set by Fannie Mae and Freddie Mac, which buy and guarantee these loans on the secondary market. Because there is no government insurance, conventional loans typically require higher credit scores and down payments — but offer better terms for those who qualify.
Conventional Loan Features
Down Payment Options
As low as 3% for first-time buyers (Fannie Mae HomeReady, Freddie Mac Home Possible). Standard minimum: 5%. Put 20% down to avoid PMI entirely.
Removable PMI
Unlike FHA's permanent MIP, conventional PMI automatically drops at 78% LTV and can be requested off at 80% LTV. This makes conventional cheaper long-term for many borrowers.
Credit Requirements
Minimum 620, but best rates require 740+. Each 20-point credit score increase can meaningfully reduce your rate and PMI cost.
Loan Limits
2024 conforming limit: $766,550 (most areas). High-cost areas (much of California): up to $1,149,825. Above these limits, you need a jumbo loan.
Property Flexibility
Can finance primary residences, second homes, and investment properties. Less restrictive property condition requirements than FHA — no strict appraisal standards.
Loan Terms
Available in fixed and adjustable rates. Terms from 10 to 30 years. Compare 15-year vs. 30-year to find your fit.
Conventional Loan Programs
Popular Conventional Options
Freddie Mac Home Possible: 3% down for low-to-moderate income borrowers. Flexible income sources allowed.
Fannie Mae HomeReady: 3% down for borrowers at or below 80% area median income. Reduced PMI rates.
Standard Conforming: 5%–20% down, 620+ credit. The most common conventional loan type.
High-Balance Conforming: For loans between the standard and high-cost-area limits.
When to Choose Conventional Over FHA
If your credit score is 700+ and you can put at least 10% down, a conventional loan is almost always cheaper over the life of the loan. The ability to remove PMI at 80% LTV (vs. FHA's permanent MIP) saves thousands. See our detailed FHA vs. Conventional comparison for a full breakdown.
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Official Government Resources
CFPB — Owning a Home
Consumer Financial Protection Bureau guide to buying a home,
comparing loan offers, and understanding closing.
HUD — Buying a Home
Department of Housing & Urban Development resources for
homebuyers, including FHA program information.
VA — Home Loans
Official VA home loan program information, eligibility, and
Certificate of Eligibility requests.
Freddie Mac — Rate Survey
Weekly Primary Mortgage Market Survey, a benchmark for national
average mortgage rates.
FHFA — Loan Limits
Federal Housing Finance Agency conforming loan limits by county,
updated annually.
IRS — Mortgage Interest Deduction
IRS guidance on deducting home mortgage interest, points, and
eligible mortgage-related expenses.
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