Conventional loans

A conventional loan isn't backed by a government agency. It's the most common mortgage, and usually the cheapest over time for borrowers with good credit.

Reviewed by Shawn Way, NMLS #1007298★ 4.9 from 111 reviewsUpdated October 28, 2026

Requirements

PMI, and how to get rid of it

PMI protects the lender when you put down less than 20%. Unlike FHA mortgage insurance, it ends. You can ask to cancel it once your balance reaches 80% of the home's original value, and it ends automatically at 78%. A new appraisal showing the home has gained value can get you there sooner.

Example

On a $350,000 home, 3% down is $10,500. Ask for a quote with and without a 2/1 buydown if the seller is offering credits.

Is a conventional loan or an FHA loan cheaper?

A conventional loan usually costs less than an FHA loan with a credit score of about 680 or higher, because PMI is cheaper than FHA insurance and it goes away. Below that score, FHA often prices better.

Already own a home with a low rate? A HELOC can get you cash without refinancing it.

See what you could afford with the affordability calculator.

What a payment looks like

A $500,000 home with 5% down: a $475,000 loan at an example 6.5% interest rate.

3% down programs

Fannie Mae HomeReady and Freddie Mac Home Possible allow 3% down with reduced mortgage insurance for borrowers at or under 80% of the area median income. Standard 3%-down conventional loans are available to first-time buyers regardless of income. Gifts from family can cover the down payment on a primary home.

PMI rules worth knowing

• You can ask to cancel PMI when your balance reaches 80% of the home's original value, if you have a good payment history.
• It ends automatically at 78% of the original value.
• If your home has risen in value, a new appraisal can sometimes remove PMI sooner, usually after two to five years of ownership.

Seller credits

Sellers can pay part of your closing costs: up to 3% of the price with under 10% down, 6% with 10%–25% down, and 9% with more than 25% down, on a primary home. On investment properties the limit is 2%.

From application to keys

1. Pre-approval with income, asset and credit review, so your offer is strong.
2. Offer accepted: rate lock, appraisal, and full underwriting.
3. Clear to close; you review the Closing Disclosure at least three business days before signing.
4. Sign, fund and record. A typical purchase closes in 21–45 days.

More questions

Should I choose a 15-year or 30-year conventional loan?

Many borrowers choose a 30-year conventional loan for flexibility and pay extra when they can. On $400,000, a 15-year loan at an example 6.0% costs about $3,375 a month and $208,000 in total interest; a 30-year at 6.5% costs about $2,528 a month and $510,000.

Can I use a conventional loan for a second home or rental?

Yes, with at least 10% down for a second home and 15%–25% for an investment property, at higher rates.

Conventional loan checklist

• Credit score of 620+, ideally 740+ for the best pricing.
• Two years of income history.
• Down payment and reserves documented.

Also asked

How do I avoid PMI with less than 20% down?

Options include a piggyback second loan for part of the down payment, lender-paid mortgage insurance built into the rate, or a VA loan if you're eligible. Each has trade-offs; compare total monthly cost.

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