What Is Conventional Loan?

A conventional loan is a mortgage that is not insured or guaranteed by any federal government agency. These loans follow guidelines set by Fannie Mae and Freddie Mac, requiring a minimum credit score of 620 and as little as 3% down. Conventional loans are the most common mortgage type in the U.S., making up roughly 80% of all home loans originated.

For example, on a $350,000 home you could put down as little as $10,500 (3%) with a conventional loan. However, if your down payment is below 20%—in this case $70,000—you will pay private mortgage insurance (PMI), which typically adds $75–$200 per month until you reach 20% equity.

Key Facts

• Minimum down payment: 3% for first-time buyers, 5% for repeat buyers
• Credit score requirement: 620 minimum, best rates at 740+
• 2025 conforming loan limit: $806,500 in most U.S. counties
• PMI removal: Automatically cancels at 78% loan-to-value ratio

Frequently Asked Questions

How is a conventional loan different from an FHA loan?

A conventional loan is not government-insured and typically requires a higher credit score (620 vs. 580). FHA loans charge mortgage insurance for the life of the loan, while conventional PMI can be removed once you reach 20% equity.

Can I get a conventional loan with less than 20% down?

Yes. You can qualify with as little as 3% down, but you will pay PMI until your loan-to-value ratio drops to 80%. Making a larger down payment saves you money on insurance over time.