Conventional Loans, Explained

The Fannie Mae Selling Guide says that a minimum credit score is not required for a loan run through Desktop Underwriter, the automated system lenders use to check a loan against Fannie Mae's rules.

A conventional loan is a mortgage that follows the rules of Fannie Mae and Freddie Mac and is not insured or guaranteed by a government agency. For a client with solid credit it is very often the lowest-cost way to buy or refinance a home.

I'm Jeff Moran, NMLS #483943, a mortgage broker in Bluffton, South Carolina, originating since 1996. Everything below comes from the Fannie Mae Selling Guide, the Eligibility Matrix (effective August 5, 2026), the Freddie Mac guide, and the agencies' published 2026 limits.

What a conventional loan is

"Conventional" means no FHA, VA or USDA behind it. "Conforming" means the loan also fits the size limit and the purchase rules of Fannie Mae and Freddie Mac, the two companies that buy conforming mortgages from lenders. Conforming loans are the kind this page covers. A conventional loan that is too large to conform is a jumbo, and it has its own page at Jumbo Loans.

Because the same two rulebooks govern the loan no matter which lender writes it, I can price it across my lenders on the same day. For the whole menu of programs side by side, see Loan Programs at a Glance and Which mortgage fits you.

How much down payment a conventional loan takes

The Eligibility Matrix sets the maximum loan-to-value ratio, and the down payment is whatever is left over. For a loan run through Desktop Underwriter, the matrix allows:

• A home you will live in, one unit: up to 97% loan-to-value on a fixed-rate loan, which is 3% down, and 95% on an adjustable-rate loan, which is 5% down.
• A home you will live in, two to four units: up to 95%, which is 5% down.
• A second home, one unit: up to 90% on a purchase, which is 10% down.
• An investment property: up to 85% on a one-unit purchase, and 75% on a two-to-four-unit purchase.

The 97% option has conditions, and they matter. Fannie Mae's guide limits it to fixed-rate loans with terms up to 30 years on a one-unit home that you occupy. At least one person on the loan must be a first-time homebuyer, and the guide defines that as someone who has not had an ownership interest in a property in the last three years. High-balance loans are not eligible, and the loan has to be approved through Fannie Mae's automated system. A separate program called HomeReady has its own rules for this range.

Putting 20% down is not a requirement. It is the point where mortgage insurance stops being required, which is the next section.

Credit scores for a conventional loan

There are two paths, and the guide treats them differently.

For a loan approved through Desktop Underwriter, the Selling Guide says a minimum credit score is not required. The system looks at the whole credit report and weighs the risk itself. Your score still matters, because Fannie Mae adds fees to the price of a loan based on the credit score, so a stronger score still earns a better price.

For a loan that is underwritten manually, the guide sets a floor of 620 for a fixed rate and 640 for an adjustable rate. The Eligibility Matrix then raises the bar with the loan-to-value ratio, the debt-to-income ratio and the cash reserves you have left after closing. For example, a one-unit home you will live in at 95% loan-to-value, with a debt-to-income ratio at or under 36%, works with a score of 680 and no reserve months. A score of 660 also works with six months of reserves. A score well above the floor makes more of the matrix available. If your score is lower than you would like, strengthening your credit is worth a read, and so is why your free score is not your mortgage score.

Second homes and investment properties must be run through Desktop Underwriter and come back with its approval-level result, according to the guide's occupancy section. Every investment property loan carries an extra price adjustment on top of everything else, and so do certain second-home loans.

Debt-to-income, as the guide states it

For a manually underwritten loan, the Selling Guide sets the maximum total debt-to-income ratio at 36% of stable monthly income, and it can go up to 45% if the Eligibility Matrix's credit score and reserve requirements are met. For a loan approved through the automated system, the maximum is 50%. The ratio compares your total monthly obligations, including the new housing payment, to your total monthly income. Debt-to-income explained walks through how each debt is counted.

Mortgage insurance on a conventional loan

Freddie Mac's guide requires mortgage insurance on each conventional loan it buys that has a loan-to-value ratio above 80%, which means less than 20% down. At 80% or lower, it is not required.

The insurance does not last forever, and the Consumer Financial Protection Bureau explains why:

• You can ask for it to be removed once your balance is scheduled to reach 80% of the original value. The servicer needs your request in writing, a good payment history, a statement that there is no second mortgage on the home, and evidence that the home has not dropped below its original value.
• It ends automatically when the balance is scheduled to reach 78% of the original value, as long as you are current on the loan.
• It ends at the midpoint of the loan's term, the month after you reach year 15 on a 30-year loan, even if the balance has not hit 78%, as long as you are current.

The CFPB adds that Fannie Mae and Freddie Mac can set their own rules, but they cannot be less favorable to you than those standards. That is a difference from FHA, where the monthly premium can stay for the life of the loan depending on how the loan is structured. The comparison is laid out at FHA Loans.

The 2026 loan limits

FHFA's baseline conforming loan limit for a one-unit home in most of the country is $832,750 for 2026, announced on November 25, 2025. In designated high-cost counties the ceiling is $1,249,125. Two-, three- and four-unit properties have higher limits, and the limit is set county by county, so your home's address decides which number applies. The loan-limit data behind this page carries all 3,235 counties.

Loans above the baseline in a high-cost county are called high-balance, and they come with extra rules. The Eligibility Matrix requires them to be run through Desktop Underwriter, and they cannot use the 97% option above. For two-to-four-unit high-balance homes the matrix caps the loan-to-value ratio lower, under 85% for two units and under 75% for three or four.

A loan amount above the limit is a jumbo, and a loan right at the line has choices worth pricing, which Conforming vs. Jumbo covers.

Conventional vs. FHA vs. jumbo

Conventional tends to win when your credit is strong, because the price responds to your score and the mortgage insurance can come off. FHA tends to win when a recent credit event or a thin credit file makes conventional pricing hard, or when its debt-to-income allowances are what make the file work. I run both side by side so you can see the monthly payment each one produces, and plenty of clients start FHA and refinance to conventional once equity and credit growth make it favorable, which Purchase, Refinance, and Cash-Out explains.

If the loan you need is above the limit for your county, the next step is a jumbo, where each lender writes its own rulebook and shopping matters most. If you are weighing a second mortgage or a line of credit against a new first mortgage, home equity options and Second Mortgages and HELOCs cover that comparison.

See your conventional options

Conventional loans are priced in the tool on the home page, so you can see an actual rate and payment for your scenario before anything else. When you're ready, you can see your rate and payment for your own scenario, or you can get pre-approved and I will go through the file with you. You are also welcome to call me at 843-765-0000 just to talk it through, with no application needed first.

Common questions

How much do you need to put down on a conventional loan?

It depends on the home and how you will use it. Fannie Mae's Eligibility Matrix allows as little as 3% down on a fixed-rate loan for a one-unit home you will live in, when at least one person on the loan is a first-time homebuyer. Otherwise a home you live in generally needs 5%, a second home 10%, and an investment property more.

Is there a minimum credit score for a conventional loan?

For a loan approved through Desktop Underwriter, the Selling Guide says no minimum credit score is required, though your score still affects the price. For a manually underwritten fixed-rate loan, the floor is 620.

Do you have to pay mortgage insurance on a conventional loan?

When the loan-to-value ratio is above 80%, yes, because Freddie Mac requires it. It can be removed once you reach 80% of the original value on request, and it ends automatically at 78%, under the rules the Consumer Financial Protection Bureau describes.

Can I use a conventional loan for a second home or investment property?

Yes. Fannie Mae's guide allows both, with a one-unit limit on second homes, lower maximum loan-to-value ratios than a home you live in, and an extra price adjustment on every investment property loan and on certain second-home loans.

What is the difference between conventional and conforming?

Conventional means the loan has no government insurance or guarantee. Conforming means it also fits the size limit and rules of Fannie Mae and Freddie Mac.

Nothing here is a loan approval, a denial, or a commitment to lend. Guidelines change, and every file is reviewed on its own facts. Your rate, payment and eligibility depend on your complete application.