Conventional Loan Guide: Conforming Limits, PMI, and 2026 Rules

What 'conventional' means

A conventional loan is any mortgage that is not insured or guaranteed by a federal government agency — distinct from FHA, VA, and USDA loans. Most conventional loans are conforming, meaning they meet Fannie Mae and Freddie Mac guidelines and can be sold into the secondary market. A smaller share are non-conforming, including jumbo loans (above the conforming limit), portfolio loans held on bank balance sheets, and non-QM loans (DSCR, bank statement, asset depletion).

Conventional financing is the largest segment of the US mortgage market and the default option for borrowers with reasonable credit and at least 3–5% down. Rate, fees, and rules are well-understood and well-shopped.

The conforming loan limit

Each year the Federal Housing Finance Agency (FHFA) sets the maximum loan amount Fannie and Freddie can buy. For 2026 the baseline conforming limit is approximately $806,500 in most counties, with high-cost area limits up to about $1.2M.

Loans at or below the limit get conforming pricing — the most competitive rates in the market. Loans above the limit are jumbo, with slightly different underwriting (often a 700+ credit minimum, 10–20% down, 6+ months reserves) and rates that can be either above or below conforming depending on lender appetite and market conditions.

Minimum down payment

3% down with Fannie's HomeReady or Freddie's HomePossible programs (income-restricted, first-time-buyer-friendly).

5% down on standard conventional loans for repeat buyers or income above HomeReady/HomePossible caps.

10% down often required for non-occupant co-borrowers, manufactured homes, and certain niche scenarios.

15% down on 2-unit; 25% down on 3–4 unit for owner-occupied multi-unit properties.

20–25% down for investment property purchases.

PMI on conventional loans

Any conventional loan above 80% LTV (less than 20% down) requires private mortgage insurance. PMI rates depend on credit score, LTV, and term — typically 0.3% to 1.5% of the loan amount per year. See our PMI guide for cancellation rules.

Conventional PMI is the cheapest mortgage insurance product available to most borrowers. FHA MIP is more expensive at most LTV levels and is permanent on most loans. This is one of conventional's main advantages over FHA for borrowers who can hit 80% LTV through appreciation or extra payments within a few years.

Credit score requirements

620 minimum for most conventional loans. Below that you're looking at FHA, non-QM, or a serious credit-rebuilding effort.

680+ for competitive pricing in the typical purchase market.

740+ for the best pricing tier. The improvement from 720 to 760 can shave 0.125–0.25 percentage points off the rate — meaningful over 30 years.

760+ typically the maximum pricing tier; further improvement helps less.

DTI rules

Conventional underwriting through the automated systems (Desktop Underwriter, Loan Product Advisor) typically caps back-end DTI at 45%, with stretches to 50% with compensating factors. Manual underwriting can stretch further but is rare.

The 28/36 rule is the traditional benchmark — 28% front-end housing payment, 36% back-end total debt. Most lenders consider that the comfortable zone. See the DTI guide for tactics to lower your ratio before applying.

Property types financed

Conventional finances single-family homes, condos (warrantable), townhouses, manufactured homes (specific guidelines), 2–4 unit owner-occupied, and 1–4 unit investment properties. Non-warrantable condos (those in projects with high investor concentration, ongoing litigation, or other red flags) often need portfolio or non-QM financing instead.

Conventional vs. FHA — when each wins

Conventional wins for borrowers with 680+ credit, 5–20% down, and the ability to cancel PMI within 3–7 years. Total cost of ownership is meaningfully lower than FHA in most scenarios.

FHA wins for borrowers in the 580–680 credit range, borrowers with thin credit history, and borrowers using down payment assistance programs FHA accepts more easily. See the FHA guide for the full comparison.