If you’re shopping for a home (or thinking about refinancing), there’s a good chance a conventional loan will be one of your best options.

Conventional loans are popular because they’re flexible, can be used for primary homes, second homes, and investment properties, and often reward strong credit and solid finances with lower overall costs.

What Is a Conventional Loan?

A conventional loan is a mortgage that isn’t insured or guaranteed by the federal government (like FHA, VA, or USDA). Instead, it’s backed by private lenders and typically follows guidelines set by Fannie Mae and Freddie Mac for “conforming” loans.

In plain English: it’s the most common “standard” mortgage, and it can be a great fit if your income, credit, and assets are in decent shape.

Why People Choose Conventional Loans

  • Low down payment options for qualified buyers (often as low as 3%)
  • PMI isn’t forever. If you put less than 20% down, private mortgage insurance can usually be removed once you build enough equity
  • Great for move-up buyers and buyers who want flexibility
  • Works for second homes and many investment scenarios
  • Lots of term options (30-year, 20-year, 15-year, and more)

Credit Score: Here’s the Real Story

This is the part most websites get wrong (or oversimplify).

Historically, you’d see “620 minimum credit score” listed everywhere for conventional loans.

That hard floor has changed. Fannie Mae announced the removal of the 620 minimum credit score requirement for new loan casefiles created on or after November 16, 2025. Freddie Mac has made similar moves, and both agencies now rely more heavily on automated underwriting’s overall risk assessment rather than a single number.

What that means for you:

  • You may still be able to qualify even if your score is below what you’ve always heard
  • Better credit still matters a lot. It typically means better interest rates, lower monthly payments, fewer lender fees and pricing adjustments, and smoother approvals
  • Many lenders still have their own minimums (called “overlays”)

If your score isn’t where you want it, I’ll tell you the truth, and I’ll also tell you what to do next to improve your options.

What Lenders Look At (Eligibility Basics)

To qualify for a conventional loan, we’re usually looking at:

  • Income stability: W-2, salary, hourly, bonus/commission, self-employed, all handled differently
  • Debt-to-income ratio (DTI): how your monthly debts compare to your income
  • Assets: down payment funds, closing costs, and sometimes reserves
  • Credit profile: not just the score, but the story behind it

Your exact approval depends on the full picture, not one single checkbox.

Types of Conventional Loans

Fixed-Rate Mortgage

Keeps the same interest rate for the life of the loan. The “set it and forget it” option.

Adjustable-Rate Mortgage (ARM)

Usually starts with a lower rate for a set period, then adjusts later. Depends on your timeline and comfort level.

Jumbo Loans

For higher-priced homes that go above standard conforming loan limits.

Conventional vs. FHA: Quick Comparison

A lot of buyers are deciding between these two.

Conventional

Often wins if you have stronger credit and want the option to remove PMI down the road.

FHA

Great fit if you need more flexible credit guidelines or a smaller down payment path.

If you’re not sure which direction to go, I’ll run it both ways and help you compare total cost, not just the monthly payment.

Is a Conventional Loan Right for You?

A conventional loan may be a great fit if you:

  • have stable income
  • have decent credit (or you’re close and willing to clean it up)
  • want flexibility in property type (primary, second home, investment)
  • want the ability to remove PMI down the road

If you’re not sure, that’s normal. Most people don’t need a “perfect” profile, they just need the right game plan.

Common Questions About Conventional Loans

Can first-time homebuyers qualify for a conventional loan?

Yes, and it’s a common misconception that conventional loans are only for repeat buyers. Many lenders offer 3% down payment options specifically designed for first-time buyers, making conventional a genuinely competitive option even if it’s your first home.

How do I get PMI removed once I have a conventional loan?

You can request PMI cancellation once your loan balance drops to 80% of your home’s original value, and it’s automatically removed at 78%, as long as you’re current on payments. Home value increases can sometimes speed this up too, worth asking about if your area has appreciated.

Do conventional loans require an escrow account?

Not always. Unlike most government-backed loans, escrow accounts are often optional on conventional loans, depending on your down payment and lender. That means more flexibility in how you handle property taxes and insurance, worth discussing based on what works best for your budget.

Are conventional loan rates higher than FHA or VA rates?

It depends on your credit profile. With strong credit, conventional rates are often very competitive, sometimes better than FHA. With lower credit, government-backed options can come out ahead. This is exactly the kind of comparison worth running with real numbers rather than guessing.