Conventional Loans

What credit score do I need for a conventional loan?

Most conventional loans require a minimum credit score of 620, though borrowers with scores of 740 or higher typically qualify for the best interest rates. Some programs for first-time buyers may accept scores as low as 620 with compensating factors like a larger down payment or lower debt-to-income ratio.

How much do I need for a down payment?

Conventional loans offer down payments as low as 3% for first-time homebuyers through programs like Fannie Mae HomeReady and Freddie Mac Home Possible. Standard conventional loans require 5% down, and putting 20% down eliminates the need for private mortgage insurance (PMI).

What is PMI and how do I get rid of it?

Private mortgage insurance (PMI) is required when your down payment is less than 20%. It typically costs between 0.5% and 1% of your loan amount annually. PMI can be automatically removed once your loan balance reaches 78% of the original home value, or you can request removal at 80% — a significant advantage over FHA loans.

What is the difference between conforming and non-conforming conventional loans?

Conforming loans meet the guidelines set by Fannie Mae and Freddie Mac, including loan limits that vary by county. In most areas, the 2024 conforming limit is $766,550. Non-conforming conventional loans exceed these limits or do not meet standard guidelines, and may have different rate and qualification requirements.

Can I use a conventional loan for an investment property?

Yes. Conventional loans can be used to purchase primary residences, second homes, and investment properties. Investment properties typically require a minimum 15-25% down payment and may carry slightly higher interest rates compared to primary residence loans.