Conventional Loans

There are two government sponsored entities that are the back-bone of conventional loans. Fannie Mae and Freddie Mac write the guidelines and are the clearing houses for funding conventional loans. This backing helps keep interest rates competitive and guidelines consistent nationwide.

Conventional loans are a popular choice for borrowers with solid credit and stable income, offering flexible terms for both first-time and repeat buyers.

At a Glance

• Down payment: as low as 3% for first time buyers, 5% for repeat buyers
• Credit score: there is no minimum credit score required, but in order to get an automated approval buyers generally need a 620 or higher
• Debt-to-income ratio: this is the amount of money coming in versus all debts, generally up to 45%, but it is possible to go up to 50% on a case by case basis
• Mortgage insurance: required with less than 20% down, but cancellable once you reach 20% equity or will automatically be removed at 22% equity
• 2026 conforming loan limit: up to $832,750 in most areas ($1,249,125 in high-cost areas)

How Conventional Loans Work

When you close on a conventional loan, your lender will to sell it to investors through bundling it into a Mortgage Backed Security rather than holding it on their own books. This frees up the lender’s capital to fund more loans, which is part of why conforming loans are widely available and competitively priced. Your day-to-day experience — making payments, escrow, servicing — will stay the same regardless of who owns and services the loan behind the scenes.

Conforming vs. Jumbo Loans

Conventional loans that fall within Fannie Mae and Freddie Mac’s loan limits are conforming loans. For 2026, the baseline conforming loan limit is $832,750 for a one-unit home in most areas, rising to $1,249,125 in designated high-cost areas. Loan amounts above these limits are considered “jumbo” loans, which fall outside Fannie Mae and Freddie Mac guidelines and typically come with stricter qualification requirements.

Fixed-Rate and Adjustable-Rate Options

Conventional loans are available with either a fixed interest rate, which stays the same for the life of the loan (commonly 15 or 30 years), or an adjustable rate (ARM), which starts with a lower introductory rate that adjusts periodically after a set number of years. For example, a 5/1 ARM is fixed for the first five years and then adjusts once a year after that. Fixed-rate loans offer payment stability, while ARMs can make sense for borrowers who plan to sell or refinance before the rate adjusts, or those who feel interest rates will fall in the future therefore adjusting their rate downward.

Why Choose a Conventional Loan?

Conventional loans tend to work well for borrowers with good credit and a stable financial history, offering flexibility for primary residences, second homes, and investment properties — something government-backed loans generally don’t allow. They can also be a smart choice for move-up buyers, refinances, and anyone looking to avoid the upfront and ongoing insurance costs associated with FHA loans.

Every borrower’s situation is different, and guidelines can vary by lender, credit profile, and property type. If you’d like to find out whether a conventional loan is the right fit for you, reach out to discuss your goals and get pre-qualified.