Quick answer
A conventional loan is a mortgage with no government insurance behind it. Most follow Fannie Mae and Freddie Mac rules and must stay within the 2026 conforming limit of $832,750 for a one-unit home ($1,249,125 in high-cost areas). You can put down as little as 3%; below 20% you pay private mortgage insurance, which you can ask to cancel at 80% of the original value and which ends automatically at 78%.
Key facts
620
Minimum score, manually underwritten fixed-rate loans
Fannie Mae Selling Guide B3-5.1-01 · Apr 22, 2026
What makes a loan conventional
“Conventional” simply means the loan isn’t insured or guaranteed by a government agency such as the FHA, VA or USDA. The lender takes the risk — or, much more often, sells the loan to Fannie Mae or Freddie Mac, the two government-sponsored enterprises that buy most US mortgages. Loans that meet their size and underwriting rules are called conforming loans.
Loans larger than the conforming limit are jumbo loans, which lenders keep or sell privately under their own rules. Both are conventional; this guide covers the conforming kind.
Conforming loan limits for 2026
The Federal Housing Finance Agency (FHFA) resets the limits every year based on home prices. For 2026 the baseline for a one-unit home is $832,750, up from $806,500 in 2025. In counties where home values are high, the limit is raised, up to a ceiling of $1,249,125. Limits for two- to four-unit properties are higher.
The limit applies to the loan amount, not the price. A larger down payment can keep an expensive home within conforming territory.
Conventional loan requirements
| Requirement | Conforming loan rule |
|---|---|
| Down payment | From 3% on a one-unit home you live in |
| Credit score | 620 for manually underwritten fixed-rate loans; no set minimum in Desktop Underwriter since November 2025 |
| Debt-to-income | 36% manual, up to 45% with strong credit and reserves, 50% in Desktop Underwriter |
| Mortgage insurance | PMI below 20% down; cancellable |
| Loan amount | Up to $832,750 ($1,249,125 in high-cost areas) |
| Occupancy | Principal residence, second home or investment property |
Occupancy changes the down payment. Fannie Mae’s Eligibility Matrix sets these maximum loan-to-value (LTV) ratios for one-unit homes:
| Transaction | Maximum LTV | Minimum down or equity |
|---|---|---|
| Purchase, principal residence (fixed rate) | 97% | 3% |
| Purchase, second home | 90% | 10% |
| Purchase, investment property | 85% | 15% |
| Cash-out refinance, principal residence | 80% | 20% |
The highest LTVs come with extra conditions, and lenders may set stricter rules (overlays).
Credit score and debt-to-income
Fannie Mae’s automated system, Desktop Underwriter (DU), stopped applying a minimum credit score in November 2025 and now weighs the whole file. Manually underwritten fixed-rate loans still need 620. In practice your score still drives the price: a higher score usually means a lower rate and much cheaper PMI. See credit score for a mortgage.
Your debt-to-income ratio (DTI) — all monthly debt payments including the new housing payment, divided by gross monthly income — can reach 50% with a DU approval. Freddie Mac’s consumer guidance suggests keeping total debts below 45%. The debt-to-income guide shows the math.
PMI: what it costs and when it ends
Private mortgage insurance protects the lender when you put down less than 20%. Freddie Mac puts the typical cost at $30–$70 a month per $100,000 borrowed, depending mostly on your credit score and down payment.
$360,000 home (near the US median value), 30-year fixed at an example rate of 7.24%
| Down payment | Loan | Principal and interest | PMI a month | Total with PMI midpoint, tax and insurance |
|---|---|---|---|---|
| 3% ($10,800) | $349,200 | $2,380 | $105–$244 | $2,968 |
| 5% ($18,000) | $342,000 | $2,331 | $103–$239 | $2,916 |
| 10% ($36,000) | $324,000 | $2,208 | $97–$227 | $2,784 |
| 20% ($72,000) | $288,000 | $1,963 | None | $2,377 |
Tax uses the national rate of 0.89% a year and insurance Freddie Mac’s average of $4.90 per $1,000 of value. PMI is shown as Freddie Mac’s typical range; your quote depends on your credit.
More on pricing and removal in PMI explained.
HomeReady and Home Possible
Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are conventional loans for lower- and moderate-income buyers. Both allow 3% down. HomeReady caps household income at 80% of the area median income, and Home Possible at 80%. They don’t require you to be a first-time buyer, but when every borrower is a first-time buyer and the LTV is above 95%, Fannie Mae requires a homebuyer education course. Both can be combined with state and local down-payment assistance.
Conventional vs FHA
| Conventional | FHA | |
|---|---|---|
| Down payment | $10,800 (3%) | $12,600 (3.5%) |
| Upfront insurance | None | 1.75% of the loan |
| Monthly mortgage insurance | $175 (PMI midpoint) | $159 (annual MIP 0.55%) |
| Insurance ends | At 78% of original value | Life of the loan with under 10% down |
| Lowest credit score | 620 manual; none set in DU | 500 with 10% down |
| Second homes and rentals | Allowed | Principal residence only |
PMI is priced on your credit: on this loan Freddie Mac’s typical range runs from $105 to $244 a month, so strong credit can put it well below FHA’s MIP — and PMI ends, while FHA’s usually doesn’t. With a low score or high debts, FHA loans can be easier to qualify for and sometimes cheaper at first. Ask for a Loan Estimate on both and compare the total cost over the years you expect to keep the loan.
Open calculatorWho conventional loans suit
- Buyers with good credit, who get the best PMI pricing and the option to cancel it.
- Buyers with 20% down, who pay no mortgage insurance at all.
- Second-home buyers and investors, since government loans require you to live in the home.
- Buyers who want flexibility on term, fixed or adjustable rates, and property type.
Frequently asked questions
What is the conforming loan limit for 2026?
$832,750 for a one-unit home in most of the country, rising to $1,249,125 in high-cost counties. Loans above your county’s limit are jumbo loans.
How much do you need to put down on a conventional loan?
As little as 3% on a one-unit home you live in. Second homes need at least 10% down and investment properties 15% under Fannie Mae’s matrix, and putting down 20% removes PMI.
What credit score do you need for a conventional loan?
Fannie Mae requires 620 for manually underwritten fixed-rate loans. Its Desktop Underwriter system has had no set minimum since November 2025, but lenders can add their own minimums and lower scores pay more for the rate and PMI.
How much is PMI on a conventional loan?
Typically $30–$70 a month for every $100,000 borrowed, according to Freddie Mac. On a $324,000 loan that is about $97–$227 a month.
When does PMI stop?
You can ask your servicer to cancel it when your balance is scheduled to reach 80% of the original value, and it ends automatically at 78% if you are current on payments. It must also end at the midpoint of the loan’s schedule.
Is a conventional loan better than FHA?
For borrowers with good credit, usually yes: PMI tends to cost less than FHA’s mortgage insurance and it can be cancelled. FHA is often easier with a lower score or higher debts. Compare Loan Estimates for both.
Can I use a conventional loan for a rental property?
Yes. Conventional loans can finance second homes and investment properties, with larger down payments — Fannie Mae’s maximum LTV for a one-unit investment purchase is 85%.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- US Census Bureau, American Community Survey 2024 1-year — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- Freddie Mac Research — Average homeowners insurance premium per $1,000 of home value (2023 data)
- Freddie Mac My Home — Typical PMI cost, low end; Typical PMI cost, high end (Oct 28, 2026)
- CFPB — Minimum down payment on some conventional loans; Minimum FHA down payment (Oct 28, 2026)
- CFPB — Ask your servicer to cancel PMI at this share of original value; PMI ends automatically at this share of original value (Oct 28, 2026)
- HUD Mortgagee Letter 2023-05 — FHA annual MIP, 30-year loan, more than 95% LTV; FHA upfront mortgage insurance premium (Feb 22, 2023)
- Fannie Mae Eligibility Matrix — Fannie Mae maximum LTV, one-unit principal residence purchase; Fannie Mae maximum LTV, second home purchase; Fannie Mae maximum LTV, one-unit investment property purchase (Apr 1, 2026)
- FHFA — 2026 baseline conforming loan limit (one-unit); 2026 high-cost area conforming ceiling (one-unit); 2025 baseline conforming loan limit (one-unit) (2026 limit)
- Fannie Mae Selling Guide B3-5.1-01 — Fannie Mae minimum score, manually underwritten fixed-rate loans (Apr 22, 2026)
- Fannie Mae Selling Guide B3-6-02 — Fannie Mae maximum DTI, manually underwritten loans; Fannie Mae maximum DTI, manual underwriting with strong credit and reserves; Fannie Mae maximum DTI, Desktop Underwriter loans (Apr 2, 2025)
- Freddie Mac My Home — Freddie Mac guidance: total debt payments below this share of gross income (Jan 22, 2026)
- Fannie Mae Selling Guide B5-6-01 — Fannie Mae HomeReady income limit (share of area median income) (Jun 4, 2025)
- Freddie Mac Home Possible fact sheet — Freddie Mac Home Possible income limit (share of area median income) (Feb 1, 2026)
- Fannie Mae Selling Guide B2-2-06 — Fannie Mae requires homebuyer education above this LTV when all borrowers are first-time buyers (Nov 5, 2025)
- HUD Mortgagee Letter 2026-11 — FHA minimum decision credit score (90% LTV cap from 500 to 579) (Oct 8, 2026)
- Fannie Mae Selling Guide Announcement SEL-2025-09 (minimum credit score removed for DU 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.