What Home Buyers Should Know About Conventional Loans
August 28, 2026
Conventional loans are the workhorse of the mortgage industry. For most buyers with steady income and decent credit, this is the loan that gets them into a home. Here's what makes a conventional loan different from other options and why it might be the right fit for your situation.
A conventional loan is any mortgage that is not insured or guaranteed by a government agency like the FHA, VA, or USDA. Instead, these loans are backed by private lenders and sold to investors, primarily Fannie Mae and Freddie Mac. Because the government isn't absorbing the risk, lenders set their own guidelines around credit, income, and down payment. That flexibility cuts both ways: borrowers with strong profiles often get better terms, while those with thinner files may find government-backed options easier to qualify for. The two main flavors are fixed-rate mortgages, where your interest rate stays the same for the life of the loan, and adjustable-rate mortgages, where the rate can change after an initial fixed period.
Down payment requirements are one of the biggest variables. Some conventional loans allow down payments as low as 3 percent, though putting down less than 20 percent typically means paying private mortgage insurance until you build enough equity. PMI isn't permanent, and it usually drops off automatically once you reach the right loan-to-value threshold. Credit score guidelines are also stricter than government programs, with most lenders looking for scores in the mid-600s or higher for the best terms. Loan limits exist too, set annually to reflect changes in home prices across the country. Going above that limit puts you into the jumbo loan territory, which comes with its own set of rules and typically stricter qualification standards.