Quick answer
A conventional loan is a mortgage that isn’t insured or guaranteed by a federal agency such as FHA, VA or USDA. Most conventional loans follow Fannie Mae or Freddie Mac rules so they can be sold to them; larger ones are jumbo loans kept by lenders or sold to private investors.
Key facts
Conventional vs government-backed
With no federal backstop, the lender or the investor that buys the loan carries the default risk, so price and approval lean heavily on your credit score, debt-to-income ratio and down payment. Some programs accept as little as 3% down, but with less than 20% down you’ll typically pay private mortgage insurance. Unlike FHA mortgage insurance, PMI can be dropped: you can ask your servicer to cancel it at 80% of the original value, and it ends automatically at 78%.
Example: when PMI stops
Buy a $350,000 home with 5% down and you borrow $332,500. At 7.24% over 30 years, principal and interest is $2,266 a month. PMI ends automatically once the scheduled balance reaches $273,000 — during year 13 if you make only the regular payments. The conventional loans guide covers credit and DTI rules.
Related terms
- Conforming loan and jumbo loan
- FHA loan, the main government-backed alternative
- HomeReady, a low-down-payment conventional program
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- CFPB — PMI ends automatically at this share of original value; Ask your servicer to cancel PMI at this share of original value (Oct 28, 2026)
- CFPB — Minimum down payment on some conventional loans (Oct 28, 2026)
- Fannie Mae Eligibility Matrix — Fannie Mae maximum LTV, one-unit principal residence purchase (Apr 1, 2026)
- CFPB: Conventional loans
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.