Conventional loan
A mortgage not insured by a government agency (FHA/VA/USDA), following Fannie Mae and Freddie Mac guidelines — usually needing stronger credit and 3–20% down.
What does conventional loan mean?
A conventional loan is the most common mortgage type — made by private lenders without a government guarantee, unlike FHA, VA or USDA loans. It follows the conforming limits and underwriting rules set by Fannie Mae and Freddie Mac, so it typically asks for a higher credit score and lower debt-to-income than a government loan. You can put as little as 3% down, but below 20% you pay private mortgage insurance, which — unlike FHA — cancels once you reach 20% equity.
Frequently asked
What credit score do you need for a conventional loan?
Most lenders want at least 620, and your rate improves as the score climbs. Below 620 an FHA loan is usually the more realistic route; at 680 and above a conventional loan typically beats FHA on total cost.
How much down payment do you need for a conventional loan?
As little as 3% for many buyers, though under 20% you pay private mortgage insurance. Reaching 20% down removes PMI from the start and often earns a better interest rate.
Conventional loan vs FHA — which is better?
Conventional usually wins if your credit is 620+ and you can drop PMI within a few years; FHA is more forgiving on credit and down payment, but its mortgage insurance often lasts the life of the loan rather than cancelling at 20% equity.
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