In short
A conventional loan is a mortgage that isn't backed by a government agency like FHA or VA and instead follows Fannie Mae and Freddie Mac guidelines. It's the most widely used loan type — it works for primary homes, second homes, and investment properties, can require as little as 3% down, and its mortgage insurance is removable once you reach 20% equity.
Reviewed by Brad Brondt, NMLS #242550 · Last updated July 23, 2026
Key takeaways
Conventional loans are the default mortgage for a reason: flexible, widely available, and the mortgage insurance isn't permanent. But 'conventional' is really an umbrella over several very different options — here's how they break down.
Fixed-rate conventional loans
A fixed-rate loan locks your principal-and-interest payment for the entire life of the loan. It never changes, which makes budgeting simple and protects you if rates rise later.
We offer fixed terms of 30, 25, 20, 15, and 10 years. A longer term means a lower monthly payment; a shorter term means a higher payment but far less interest paid overall and a home paid off years sooner.
- 30-year fixed — the lowest monthly payment; by far the most popular choice.
- 20- and 25-year fixed — a middle ground: pay off sooner without the jump of a 15-year payment.
- 15- and 10-year fixed — higher payments, dramatically less total interest, and rapid equity.
Adjustable-rate mortgages (ARMs)
An ARM starts with a fixed rate for an initial period, then adjusts periodically. It can make sense if you expect to move or refinance before the fixed period ends, since the initial payment is often lower than a comparable fixed loan.
We offer 5/6, 7/6, and 10/6 ARMs — the first number is how many years the rate stays fixed, after which it can adjust every six months within set caps.
Low-down-payment options: HomeReady & Home Possible
HomeReady (Fannie Mae) and Home Possible (Freddie Mac) are conventional loans built for first-time and low-to-moderate-income buyers. They allow down payments as low as 3% and come with reduced mortgage insurance, which lowers your monthly payment compared to a standard conventional loan.
Income limits apply and vary by area, and these programs pair well with down payment assistance. If a low upfront cost is your priority, this is often the smartest conventional path.
High-balance conforming loans
In higher-cost counties, the conforming loan limit is raised. A high-balance conforming loan lets you borrow above the standard limit while still using conventional guidelines and pricing — so you don't have to jump straight to a jumbo loan for a higher-priced home.
Second homes and investment properties
Conventional financing isn't just for primary residences. It also covers second homes and 1–4 unit investment properties, typically with a larger down payment and slightly different pricing. If you're building a rental portfolio, we'll walk through how conventional stacks up against DSCR and other investor options.
Already own? RefiNow and Refi Possible
If you already have a conventional loan, RefiNow (Fannie Mae) and Refi Possible (Freddie Mac) are streamlined refinance options for eligible lower-income homeowners, designed to reduce your rate and payment with fewer hurdles. We'll tell you honestly whether refinancing actually saves you money before you spend a dollar on it.
Quick facts
- Minimum down payment
- As low as 3% (primary residence, eligible programs)
- Mortgage insurance
- PMI required under 20% equity — removable, not permanent
- Terms
- Fixed 10–30 years; ARMs 5/6, 7/6, 10/6
- Property types
- Primary, second home, and 1–4 unit investment
- Loan size
- Up to the conforming limit; high-balance in high-cost counties
- Credit
- Typically 620+ (subject to change and eligibility)
Is this loan right for you?
Who it's for
- Buyers with decent credit who want the most flexible, widely available loan.
- Anyone who wants mortgage insurance that eventually goes away, rather than staying for the life of the loan.
- First-time buyers who qualify for 3%-down HomeReady or Home Possible.
- Buyers of second homes or 1–4 unit investment properties.
Who it may not fit
- Buyers with lower credit scores who may qualify more easily with an FHA loan.
- Eligible veterans and service members, who usually do better with a 0%-down VA loan.
- Buyers with very little saved and no down payment assistance who need a lower-down government option.
Pros and cons
Pros
- Mortgage insurance is removable once you hit 20–22% equity.
- Low down payment options (as little as 3%) for eligible buyers.
- Works across primary, second, and investment properties.
- Flexible fixed and adjustable term options to fit your plans.
Trade-offs to weigh
- Tighter credit and debt-to-income standards than FHA.
- PMI is required until you reach 20% equity if you put less down.
- Low-down programs have income limits that not everyone meets.
Frequently asked questions
How much do I need to put down on a conventional loan?
As little as 3% for eligible first-time and low-to-moderate-income buyers through HomeReady or Home Possible, and typically 5% for other primary-residence buyers. More down means a lower payment and less mortgage insurance. Second homes and investment properties require larger down payments.
Do conventional loans have mortgage insurance?
If you put down less than 20%, yes — private mortgage insurance (PMI). Unlike FHA insurance, conventional PMI is not permanent: it automatically ends at 22% equity, and you can request removal at 20%. That's one of the biggest advantages of a conventional loan.
What credit score do I need?
Conventional loans generally start around a 620 credit score, and stronger credit strengthens your qualifying profile. If your score is lower, an FHA loan may be an easier fit — we'll compare both for you honestly.
What's the difference between a fixed rate and an ARM?
A fixed rate never changes for the life of the loan. An ARM (5/6, 7/6, or 10/6) is fixed for the first 5, 7, or 10 years and then can adjust. An ARM can save money if you expect to move or refinance before the fixed period ends.
Can I use a conventional loan for an investment property?
Yes. Conventional financing covers 1–4 unit investment properties and second homes, usually with a larger down payment. For investors, we'll also compare it against DSCR and other options to find the best fit.
What is a high-balance conforming loan?
In high-cost counties, the conforming loan limit is raised. A high-balance conforming loan lets you borrow above the standard limit while still using conventional guidelines — a lower-cost alternative to a jumbo loan for higher-priced homes.
Related loan programs
Lower credit and down-payment flexibility with a government-backed loan.
Financing above the conforming limit for higher-priced homes.
Programs that can cover your down payment and closing costs.
Last updated July 23, 2026 · Reviewed by Brad Brondt, NMLS #242550. This page is educational and not a commitment to lend. Program details, figures, and eligibility are subject to change — ask for current numbers. Brondt Cook Group operates through Acre Mortgage and Financial, Inc., NMLS #13988. Equal Housing Lender.