The most popular home loan in America
Put as little as 3% down, choose from 15- or 30-year fixed terms, and drop your mortgage insurance once you reach 20% equity. Conventional loans combine flexibility with long-term savings for buyers with solid credit.
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Conventional vs FHA vs VA
Not sure which loan type fits? Here is a side-by-side look at the three most common options.
| Feature | Conventional | FHA | VA |
|---|---|---|---|
| Down payment | 3 - 20% | 3.5% | 0% |
| Credit score | 620+ | 580+ | No official min. |
| Mortgage insurance | PMI (removable at 20%) | MIP (lifetime on most loans) | None (VA funding fee instead) |
| Loan limits | $766,550 | $498,257 | No limit |
| Property types | Primary, second home, investment | Primary only | Primary only |
| Best for | Good credit, 5%+ down | First-time buyers, lower credit | Veterans and service members |
Who is a conventional loan right for?
The credit-conscious buyer
You have a credit score of 700 or higher and want to leverage that history into a lower interest rate and reduced mortgage insurance costs. Conventional loans reward strong credit more aggressively than any government-backed option.
The 20%-down saver
You have saved enough to put 20% down and want to avoid mortgage insurance entirely. With no PMI and competitive rates, a conventional loan keeps your monthly payment as lean as possible from day one.
The second-home buyer
You are purchasing a vacation home or investment property. FHA and VA loans restrict you to a primary residence, but conventional loans let you finance second homes with as little as 10% down and investment properties with 15-25% down.
The FHA-to-conventional refinancer
You currently have an FHA loan and have built at least 20% equity. Refinancing into a conventional loan eliminates the lifetime MIP that FHA charges, potentially saving you hundreds of dollars each month.
How private mortgage insurance works
Private mortgage insurance (PMI) protects the lender if you default on your loan. It is required on conventional loans when your down payment is less than 20%, but unlike FHA mortgage insurance, PMI can be removed once you build enough equity.
When does PMI apply?
PMI is added to your monthly payment whenever your loan-to-value ratio (LTV) exceeds 80% -- meaning you put less than 20% down. The cost typically ranges from 0.3% to 1.5% of the original loan amount per year, depending on your credit score and down payment.
What does it actually cost?
On a $300,000 loan with 5% down ($15,000), PMI runs roughly $125 per month, or about $1,500 per year. With a 10% down payment on the same purchase price, PMI drops to approximately $75 per month.
How do you remove it?
You can request PMI removal once your loan balance falls below 80% of the home's original appraised value. Your lender is required by law to automatically cancel PMI when you reach 78% LTV through scheduled payments. You can also reach 20% equity faster by making extra principal payments or through home value appreciation.
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