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title: “Conventional Loan Requirements: Everything You Need to Know” ogImage: “/og/satori/conventional-loan-requirements-guide.png” description: “Understand conventional mortgage requirements including credit scores, down payments, PMI, and how they differ from FHA loans.” pubDate: 2026-03-15 faqSchema:

• question: “What credit score is needed for a conventional loan?” answer: “Most lenders require a minimum credit score of 620 for a conventional loan. To get the best rates, aim for 740 or higher. A score above 760 typically qualifies for the lowest rates.”
• question: “Can I get a conventional loan with 5% down?” answer: “Yes, you can get a conventional loan with as little as 5% down (3% for first-time homebuyers with some programs). However, putting down less than 20% requires private mortgage insurance.”
• question: “What is the debt-to-income ratio for conventional loans?” answer: “Most conventional loans require a maximum DTI of 43%, though some lenders may allow up to 50% with strong compensating factors like high credit scores or significant cash reserves.”
• question: “How long does PMI last on a conventional loan?” answer: “PMI automatically cancels when your loan balance reaches 78% of the original home value. You can request removal at 80% LTV. Typically this takes 5-11 years depending on your down payment.”
• question: “Is a conventional loan better than FHA?” answer: “It depends on your situation. Conventional loans typically have lower total costs for borrowers with good credit (700+) and 10%+ down. FHA loans are better for lower credit scores or smaller down payments.”
• question: “Can I use a conventional loan for a second home?” answer: “Yes, conventional loans can be used for primary residences, second homes, and investment properties, unlike FHA loans which are restricted to primary residences only.”---

Quick Answer

A conventional loan is a mortgage not backed by a government agency, typically requiring a credit score of 620+, a down payment of at least 5%, and a debt-to-income ratio below 43%. Conventional loans offer more flexibility than government-backed loans and can be used for primary residences, second homes, and investment properties.

Key Takeaways

• Conventional loans require a minimum credit score of 620 (740+ for best rates)
• Down payments start at 5% (3% for first-time buyers with certain programs)
• Private mortgage insurance (PMI) is required with less than 20% down but cancels automatically at 78% LTV
• Conventional loans can finance primary residences, second homes, and investment properties
• DTI ratio should generally not exceed 43% of gross monthly income
• Borrowers with strong credit and 20% down avoid mortgage insurance entirely

What Is a Conventional Loan?

A conventional mortgage is a home loan that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. These loans follow guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy and securitize mortgages in the secondary market.

Conventional loans are the most common type of mortgage in the United States, accounting for roughly 60% of all home loans originated. They offer competitive interest rates and flexible terms, making them a popular choice for borrowers with good credit and stable income.

Credit Score Requirements

Your credit score is one of the most important factors in qualifying for a conventional loan:

• 620 minimum: This is the baseline score most lenders require. Below this threshold, you will likely need an FHA loan.
• 660-739: You can qualify but will pay higher interest rates and PMI premiums.
• 740-759: You will access competitive rates and reasonable PMI costs.
• 760+: You qualify for the best available rates and lowest PMI premiums.

Even a 20-point difference in your credit score can significantly impact your interest rate and monthly payment. For example, on a $300,000 loan, the difference between a 680 and 760 credit score could mean $100+ per month in savings.

Down Payment Requirements

Contrary to popular belief, you do not need 20% down to get a conventional loan:

• 3% down: Available to first-time homebuyers through Fannie Mae HomeReady and Freddie Mac Home Possible programs. Income limits apply.
• 5% down: The standard minimum for most conventional loans.
• 10% down: A sweet spot that lowers your monthly PMI cost significantly.
• 20% down: Eliminates PMI entirely and gives you the best loan terms.

For a $350,000 home, 5% down means $17,500, while 20% down requires $70,000. The right choice depends on your savings and how much monthly payment you can comfortably afford.

Private Mortgage Insurance (PMI)

When you put down less than 20%, your lender will require private mortgage insurance (PMI). This protects the lender if you default on the loan. PMI costs vary based on your credit score and down payment amount.

PMI Rates by Credit Score (approximate annual rates):

• 760+ credit score, 5% down: 0.30-0.50%
• 700-759 credit score, 5% down: 0.50-0.70%
• 660-699 credit score, 5% down: 0.70-1.00%
• 620-659 credit score, 5% down: 1.00-1.50%

The key advantage of conventional PMI over FHA MIP is that PMI automatically cancels when your loan balance reaches 78% of the original home value. You can also request cancellation at 80% LTV. Use our FHA vs Conventional Loan Calculator to compare PMI vs MIP costs for your specific situation.

Debt-to-Income Ratio (DTI)

Lenders use your DTI ratio to determine how much home you can afford. There are two ratios to consider:

Front-end ratio (housing ratio): Your total housing payment (PITI) divided by gross monthly income. Most lenders prefer this ratio at or below 28%.

Back-end ratio (total DTI): Your total monthly debt payments (housing + credit cards + auto loans + student loans + etc.) divided by gross monthly income. The maximum is typically 43%, though exceptions exist up to 50% with strong compensating factors.

Property Types Allowed

Unlike FHA loans, conventional mortgages can be used for a wide range of property types:

• Primary residences: Single-family homes, condos, townhouses, and 2-4 unit properties
• Second homes: Vacation properties (with some restrictions)
• Investment properties: Rental properties (higher down payment and rate requirements)

This flexibility makes conventional loans more versatile for borrowers with diverse real estate goals.

Documentation Required

To apply for a conventional loan, you will need to provide:

1. Two years of W-2 forms and tax returns
2. Recent pay stubs (30 days)
3. Two months of bank statements showing down payment funds
4. Photo identification
5. Gift letter (if receiving down payment assistance)
6. Explanation for any large deposits

Self-employed borrowers need additional documentation including profit and loss statements and business tax returns.

Conventional vs FHA: Which Is Better?

The answer depends on your specific financial situation. Here is a quick comparison:

Factor	Conventional	FHA
Min. Credit Score	620	580
Min. Down Payment	3-5%	3.5%
Mortgage Insurance	PMI (cancels)	MIP (often permanent)
Property Types	All types	Primary only
Loan Limits	Higher (conforming)	Lower (FHA limits)

For borrowers with credit scores above 700 and the ability to put 5-10% down, conventional loans almost always cost less over time. Use our calculator and read our FHA MIP vs Conventional PMI comparison to make an informed decision.

See our complete first-time homebuyer guide for more details on choosing the right loan type.