CONVENTIONAL MORTGAGE GUIDE
Conventional Loans: Compare Mortgage Options
A conventional loan is a mortgage that is not insured or guaranteed by a federal government agency such as the Federal Housing Administration, Department of Veterans Affairs or U.S. Department of Agriculture.
Conventional mortgages can finance a primary home, second home or investment property, subject to the program and provider. Options may include conforming and non-conforming loans, fixed or adjustable rates, and down payments that vary with the borrower, transaction and property.
ShopRates helps consumers understand conventional mortgage choices and connect with independent providers that can evaluate eligibility and terms.
Exploring options does not guarantee approval, a specific rate, savings or loan terms.
What to compare
CONVENTIONAL LOANS AT A GLANCE
Government backing
Not insured or guaranteed by FHA, VA or USDA
Common uses
Primary residences, second homes, investment properties, purchases and eligible refinances
Down payment
Varies; certain eligible conventional purchase programs allow as little as 3% down
Mortgage insurance
PMI commonly applies when the down payment is below 20%; cancellation rules can apply
Loan size
Conforming loans stay within applicable FHFA limits; loans outside agency standards are non-conforming
Qualification
Credit, income, debts, assets, property, occupancy and automated/manual underwriting may be considered
What Is a Conventional Loan?
A conventional loan is a home mortgage that is not insured or guaranteed by a federal housing agency. The loan is made by a private lender or other mortgage provider and may be eligible for purchase by Fannie Mae or Freddie Mac when it meets their standards.
A conforming conventional loan meets applicable enterprise requirements, including the county and property-unit loan limit. A non-conforming conventional loan falls outside one or more of those standards. Jumbo loans are a common non-conforming category, but “non-conforming” can also describe other structures.
Conventional does not automatically mean a 30-year fixed loan, a 20% down payment or a loan for borrowers with perfect credit. Product terms and underwriting vary.
Direct answer: Conventional describes the source of mortgage insurance or guarantee—not one single rate, term, down payment or underwriting standard.
Types of Conventional Mortgages
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| Type | What it means | Primary decision factor |
|---|---|---|
| Conforming | What it meansMeets applicable Fannie Mae or Freddie Mac acquisition standards and FHFA limits | Primary decision factorCounty limit, property, occupancy and underwriting |
| Non-conforming | What it meansDoes not meet one or more enterprise standards | Primary decision factorProvider-specific eligibility, documentation and pricing |
| Jumbo | What it meansLoan amount exceeds the applicable conforming limit | Primary decision factorHigher loan size, reserves and provider standards |
| Fixed-rate | What it meansInterest rate does not change during the loan term | Primary decision factorPayment stability and expected holding period |
| Adjustable-rate | What it meansRate may adjust after an initial period under the note/index/margin rules | Primary decision factorAdjustment caps, index, margin and future payment risk |
| Portfolio | What it meansProvider retains the loan rather than selling it under agency execution | Primary decision factorProvider-specific features and servicing |
| Affordable conventional | What it meansExamples include HomeReady and Home Possible for eligible borrowers | Primary decision factorIncome, occupancy, education and product rules |
Conventional Loan Requirements
Conventional mortgage approval depends on the complete risk profile, not one universal cutoff. Providers may evaluate credit history and scores, qualifying income, employment or business stability, monthly debts, assets, down payment, reserves, occupancy, property type, appraisal and the requested loan structure.
Fannie Mae and Freddie Mac publish detailed eligibility and underwriting standards, while providers may apply additional requirements. Automated underwriting findings can also affect documentation, reserves and allowable ratios.
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| Factor | What may be evaluated | Important caveat |
|---|---|---|
| Credit | What may be evaluatedScores, payment history, utilization, derogatory events and inquiries | Important caveatNo single score guarantees approval or price |
| Income | What may be evaluatedAmount, stability, likelihood of continuance and documentation | Important caveatGross revenue is not the same as qualifying income |
| Debt-to-income | What may be evaluatedRequired monthly obligations relative to qualifying income | Important caveatAllowable ratios vary by findings and risk factors |
| Assets | What may be evaluatedDown payment, closing funds, reserves and source of funds | Important caveatLarge deposits and gifts may require documentation |
| Property | What may be evaluatedValue, condition, type, use and marketability | Important caveatCondo, manufactured, multi-unit and unique properties may have added rules |
| Occupancy | What may be evaluatedPrimary residence, second home or investment use | Important caveatMisstating occupancy can be mortgage fraud |
Conventional Loan Down Payments
A 20% down payment is not required for every conventional loan. Certain eligible conventional purchase programs allow down payments as low as 3%, while other transactions may require 5%, 10%, 20% or more based on occupancy, property type, number of units, loan amount and underwriting.
A smaller down payment preserves cash but generally increases the loan-to-value ratio, monthly payment and potential mortgage-insurance cost. A larger down payment can reduce the loan amount and may improve pricing, but it should not eliminate emergency reserves or funds needed for repairs and ownership costs.
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| Down-payment scenario | Potential benefit | Evaluate carefully |
|---|---|---|
| 3% eligible option | Potential benefitLower upfront contribution | Evaluate carefullyProduct/income/first-time/education rules; PMI and higher balance |
| 5%–10% | Potential benefitMore equity while preserving some liquidity | Evaluate carefullyPMI cost, pricing and reserve needs |
| 15% | Potential benefitLower balance and possible pricing improvement | Evaluate carefullyPMI may still apply; compare against 20% |
| 20% or more | Potential benefitPMI generally not required on a conventional loan | Evaluate carefullyOpportunity cost and remaining cash reserves |
| Gift/assistance funds | Potential benefitCan reduce buyer’s own cash requirement when permitted | Evaluate carefullyEligible donor/source, documentation, repayment and lien terms |
First-time homebuyer loans →  · Down payment assistance →  · Fannie Mae 97% LTV options  · Freddie Mac Home Possible
Private Mortgage Insurance (PMI)
Private mortgage insurance protects the lender or mortgage owner—not the borrower—against certain losses if the borrower defaults. PMI is commonly required on a conventional loan when the borrower puts less than 20% down.
PMI pricing can depend on credit profile, loan-to-value ratio, occupancy, property and coverage structure. It may be paid monthly, upfront, through a lender-paid structure reflected in pricing, or in another permitted form.
Federal law provides cancellation and automatic-termination rights for many borrower-paid PMI arrangements on qualifying principal-residence mortgages, subject to requirements. Ask the servicer for the written cancellation criteria; do not assume PMI disappears automatically at a particular market value.
CFPB: What is private mortgage insurance?
CFPB: How to cancel PMI
Conforming Loan Limits
The Federal Housing Finance Agency sets annual conforming loan limits for mortgages Fannie Mae and Freddie Mac may acquire. For 2026, the baseline limit for a one-unit property in most of the United States is $832,750. Higher limits apply in qualifying high-cost areas, and separate limits apply to two-, three- and four-unit properties.
The limit applies to the mortgage principal balance—not the home’s purchase price. A buyer may purchase a higher-priced home while keeping the loan within the applicable limit by making a larger down payment.
Verify the property county, number of units and current calendar-year limit before classifying a loan as conforming.
One-unit property in most of the United States. Higher-cost areas and multi-unit properties differ.
Check your county limit →Scroll sideways to see the full table.
| Limit check | What to confirm |
|---|---|
| Year | What to confirmDisplay “2026” adjacent to every numeric limit |
| Location | What to confirmUse FHFA’s county lookup; do not infer from city name |
| Units | What to confirmConfirm one-, two-, three- or four-unit classification |
| Special areas | What to confirmCheck Alaska, Hawaii, Guam and U.S. Virgin Islands rules |
| Annual update | What to confirmReview after FHFA publishes the next calendar-year limits |
Conventional Mortgage Rates and Costs
Conventional mortgage rates are not one universal number. Pricing may reflect market conditions, credit profile, loan-to-value ratio, loan amount, occupancy, property type, term, fixed or adjustable structure, points, lender credits and rate-lock period.
Compare the note rate with annual percentage rate (APR), points or credits, mortgage insurance, lender and third-party fees, monthly payment, cash to close and the cost over the period you expect to keep the loan.
A lower advertised rate may require discount points. A lender credit may reduce upfront costs while increasing the rate. Neither is inherently better; the break-even period and expected ownership timeline matter.
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| Term | Meaning | Comparison question |
|---|---|---|
| Interest rate | MeaningRate used to calculate principal and interest | Comparison questionIs it fixed? If adjustable, when and how can it change? |
| APR | MeaningMeasure reflecting interest and certain credit costs | Comparison questionWhich costs are included, and is the scenario identical? |
| Discount points | MeaningUpfront amount paid for a lower rate | Comparison questionHow many months until the payment savings recover the cost? |
| Lender credit | MeaningCredit often exchanged for a higher rate | Comparison questionHow much additional interest may result over the expected term? |
| Rate lock | MeaningAgreement holding specified pricing for a period | Comparison questionWhat are expiration, extension and float-down terms? |
| Cash to close | MeaningEstimated funds due after credits and deposits | Comparison questionWhich amounts are verified versus estimated? |
Major Conventional Program Paths
Standard Conventional Mortgage
A standard conventional mortgage can support eligible purchases or refinances across a range of down payments, terms, occupancy types and properties. The exact eligibility rules depend on the agency, provider and underwriting result.
This path may fit borrowers who do not need an income-restricted affordable product or government-backed financing. Compare the standard option with every program for which you may qualify.
Fannie Mae HomeReady®
HomeReady is an affordable conventional program designed for creditworthy low-income borrowers. Fannie Mae describes down payments as low as 3%, flexible funding sources and reduced mortgage-insurance coverage for eligible loans.
Income, occupancy, education, property and underwriting requirements apply. Verify current eligibility with the provider and Fannie Mae resources.
Official reference: Fannie Mae HomeReady overview
Freddie Mac Home Possible®
Home Possible is an affordable conventional program with down payments as low as 3% for eligible borrowers. Current Freddie Mac materials describe income limits and flexible funding sources.
Confirm area-median-income eligibility, occupancy, education, property, mortgage-insurance and underwriting requirements.
Official reference: Freddie Mac Home Possible overview
Freddie Mac HomeOne®
HomeOne is a low-down-payment conventional option for qualified first-time homebuyers. Freddie Mac describes a 3% down payment and no geographic or income limits, subject to program requirements.
At least one borrower must meet the program’s first-time homebuyer definition, and education and property rules may apply.
Official reference: Freddie Mac HomeOne overview
Properties and Common Use Cases
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| Use/property | Potential conventional path | Verify |
|---|---|---|
| Primary residence | Potential conventional pathBroadest set of conventional and affordable options | VerifyUnits, occupancy, down payment and education |
| Second home | Potential conventional pathConventional financing may be available | VerifyExclusive control, occupancy, location and rental restrictions |
| Investment property | Potential conventional pathConventional purchase or refinance may be available | VerifyHigher equity/reserves, rental income and property count |
| Condominium | Potential conventional pathUnit and project must satisfy applicable review rules | VerifyProject eligibility, insurance, budget, litigation and ownership concentration |
| 2–4 unit home | Potential conventional pathEligible owner-occupied or investment structure may be available | VerifyUnit count, rental income, reserves and limit |
| Manufactured home | Potential conventional pathCertain properties and titles may qualify | VerifyReal-property status, construction standards, land and program |
| Renovation | Potential conventional pathHomeStyle or other conventional renovation financing may apply | VerifyContractor, plans, appraisal and draw administration |
Investment property loans →  · Second-home loans →  · Condo loans →  · Multi-unit property loans →  · Renovation loans →
Conventional vs. Government-Backed Loans
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| Feature | Conventional | FHA | VA | USDA |
|---|---|---|---|---|
| Backing | ConventionalNo federal insurance/guarantee | FHAFHA insured | VAVA guaranteed | USDAUSDA guaranteed |
| First-time only | ConventionalNo | FHANo | VANo | USDANo |
| Low/no down options | ConventionalCertain programs as low as 3% | FHAAs low as 3.5% under FHA guidance | VAEligible borrowers may have no down payment | USDAQualified borrowers may have no down payment |
| Mortgage/guarantee cost | ConventionalPMI may apply below 20% | FHAUpfront and annual mortgage insurance | VAFunding fee may apply unless exempt | USDAGuarantee fees apply |
| Key eligibility | ConventionalAgency/provider underwriting | FHAFHA/lender/property rules | VAMilitary eligibility and entitlement | USDAHousehold income and eligible rural property |
| Occupancy breadth | ConventionalPrimary, second home, investment—program dependent | FHAGenerally primary residence | VAPrimary residence | USDAPrimary residence |
The lowest down payment is not automatically the lowest-cost loan. Compare the full written offer, insurance or guarantee charges, property rules, cash to close and expected holding period.
FHA loans →  · VA loans →  · USDA loans →
Document Checklist
Identity and housing
- Government ID
- Address and housing history
- Social Security information as requested
- Explanations/documents for material credit events
Income and employment
- Recent pay statements
- W-2s/tax returns when required
- Employer contacts
- Self-employment/business records when applicable
- Other qualifying-income records
Assets and property
- Bank/investment statements
- Purchase contract
- Earnest-money trail
- Gift or assistance documentation
- Insurance quote
- Property/HOA documents as requested
Privacy: Use the provider’s secure document portal. Do not send Social Security numbers, tax returns, bank statements or identity records through ordinary email or a general contact form.
Conventional Loan Process
- Define a comfortable payment, cash-to-close range and reserve goal.
- Review credit reports, recurring debts and income documentation.
- Choose purchase or refinance goals and likely property/occupancy.
- Compare conventional with government-backed options when eligible.
- Request documented preapproval scenarios from qualified providers.
- Select a property and sign a contract with protections you understand.
- Submit a complete loan application and required documents.
- Review the Loan Estimate and compare terms across providers.
- Complete appraisal, title, insurance and property reviews.
- Respond to underwriting requests and avoid material financial changes.
- Review the Closing Disclosure and final figures before signing.
- Close, keep copies, confirm servicing details and monitor PMI rights.
Before closing: Ask the provider before opening or closing credit, financing a vehicle or furniture, changing jobs, moving large funds, co-signing, missing payments or making undocumented deposits. Reverification can occur before closing.
Compare Written Loan Offers
Request Loan Estimates for the same loan amount, down payment, property use, term, rate type and lock period. Ask each provider to show both a lower-upfront-cost and lower-rate option when appropriate.
Review pages 1–3 together. Compare loan terms, projected payments, closing costs, cash to close, APR and the “In 5 Years” figures. Ask why any estimate differs from what you discussed.
Scroll sideways to see the full worksheet.
| Field | Offer A | Offer B | Offer C |
|---|---|---|---|
| Loan amount | Offer A | Offer B | Offer C |
| Rate / lock period | Offer A | Offer B | Offer C |
| APR | Offer A | Offer B | Offer C |
| Points / lender credits | Offer A | Offer B | Offer C |
| Monthly principal + interest | Offer A | Offer B | Offer C |
| PMI / other insurance | Offer A | Offer B | Offer C |
| Estimated cash to close | Offer A | Offer B | Offer C |
| Five-year total cost / principal paid | Offer A | Offer B | Offer C |
| Assistance or subordinate lien | Offer A | Offer B | Offer C |
Print this page or copy the fields to record each written offer side by side.
CFPB Loan Estimate explainer  · Mortgage payment calculator →  · How much house can I afford? →
Frequently Asked Questions
What is a conventional loan?
A conventional loan is a mortgage that is not insured or guaranteed by a federal government agency such as FHA, VA or USDA.
What is the difference between conforming and conventional?
Conventional is the broad category. A conforming conventional loan meets applicable Fannie Mae or Freddie Mac standards, including the FHFA loan limit; a non-conforming conventional loan does not meet one or more of those standards.
How much down payment is required for a conventional loan?
The required down payment varies. Certain eligible programs allow as little as 3% down, while occupancy, property type, loan amount and underwriting may require more.
Do conventional loans require 20% down?
No. A 20% down payment is not universally required. With less than 20% down, private mortgage insurance commonly applies.
What is the conventional loan limit for 2026?
For 2026, the baseline conforming loan limit for a one-unit property in most of the United States is $832,750. Higher-cost areas and multi-unit properties have different limits; verify the county with FHFA.
What credit score is needed for a conventional loan?
There is no score that guarantees approval across every conventional product and provider. Credit score, history, income, debts, assets, property and the full underwriting result matter.
Can PMI be removed from a conventional loan?
Many borrower-paid PMI arrangements on qualifying principal-residence loans have cancellation and automatic-termination rights, subject to federal law and loan requirements. Ask the servicer for written criteria.
Can a conventional loan finance an investment property?
Potentially. Conventional financing may be available for eligible investment properties, usually with different down-payment, reserve, pricing and rental-income requirements than a primary residence.
Is a conventional loan better than FHA?
Neither is universally better. Compare rate, APR, mortgage insurance, down payment, property rules, cash to close and the expected time you will keep the loan.
How should I compare conventional mortgage offers?
Compare Loan Estimates using the same scenario, including rate, APR, points or credits, PMI, payment, cash to close, lock period and five-year cost figures.
Ready to Compare Conventional Loan Options?
Explore potential mortgage paths and connect with independent providers that can evaluate your credit profile, income documentation, property and goals.
ShopRates does not make loans or credit decisions. Eligibility and terms are determined by independent providers.
RELATED RESOURCES
Sources
- FHFA 2026 conforming loan limits — fhfa.gov news release
- FHFA county limit lookup — fhfa.gov/data/conforming-loan-limit
- Fannie Mae 97% LTV options — singlefamily.fanniemae.com
- Fannie Mae HomeReady — singlefamily.fanniemae.com
- Freddie Mac Home Possible — sf.freddiemac.com
- Freddie Mac HomeOne — sf.freddiemac.com
- CFPB Loan Estimate — consumerfinance.gov
- CFPB private mortgage insurance — consumerfinance.gov
- CFPB consumer mortgage guidance — consumerfinance.gov/consumer-tools/mortgages
ShopRates provides general educational information and may connect consumers with independent mortgage providers. ShopRates is not a lender, bank, mortgage broker, loan originator, servicer, underwriter or credit decision-maker. We do not provide individualized legal, tax, investment or financial advice. We do not guarantee approval, eligibility, rates, savings, closing dates or loan terms.
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