Conventional Loans

A conventional loan is any mortgage that isn't backed by the federal government (so not FHA, VA, or USDA). Most conventional loans follow guidelines set by Fannie Mae and Freddie Mac — the two giant agencies that buy mortgages from lenders. Following those guidelines unlocks the most competitive pricing in the market.

Because conventional loans aren't tied to a government program, they come with fewer property restrictions and can be used for primary homes, second homes, and rental properties.

The 20% down myth needs to die. With Fannie Mae's HomeReady and Freddie Mac's Home Possible programs, qualified first-time buyers can put down as little as 3%. Repeat buyers typically start at 5%.

If you put down less than 20%, you'll pay private mortgage insurance (PMI) — but here's the good news: PMI on a conventional loan automatically drops off once you reach 22% equity, and you can request early removal at 20%. That's a meaningful difference compared to FHA, where mortgage insurance often stays for the life of the loan.

A 30-year fixed gives you the lowest monthly payment and maximum flexibility. A 15-year fixed comes with a noticeably lower interest rate and dramatically less interest paid over the life of the loan — but the monthly payment is higher. A 20-year is the middle ground that surprisingly few buyers know about.

Our take: most buyers should take the 30-year and make extra principal payments when their cash flow allows. You get the lower required payment as a safety net and the flexibility to pay it off faster on your terms.

Conventional loan pricing is highly sensitive to your credit score. The big breakpoints typically sit at 620, 660, 700, 740, and 780. Moving from a 695 to a 700 can save you real money over the life of the loan.

If you're close to a tier breakpoint, we'll often suggest small credit-optimization moves before lock — paying down a card, removing an old collection — that can shift you into better pricing within 30–45 days.

If your credit is below 620, your debt-to-income ratio is tight, or you have very limited reserves, FHA may be the smarter starting point — even if you eventually refinance to conventional later. If you're a veteran, VA almost always wins on cost. And if you're buying in a rural area, USDA's zero-down can beat conventional outright.

The right loan isn't always the most popular one. We'll run the numbers on every program you qualify for and show you the side-by-side.