Conventional Loans — 2026 Requirements, Down Payments and Limits
Conventional loans need a 620 credit score and 3% down as a first-time buyer, or 5% if you have owned before. The 2026 conforming limit is $832,750 in most counties, and the mortgage insurance comes off on its own at 20% equity — which is usually where conventional beats FHA on what the loan costs you in total.
Last updated August 2026 · reviewed by a licensed mortgage broker
★★★★★5.0 on GoogleNMLS #1630225 · verify on NMLS Consumer AccessLicensed in NJ · CT · FL (FL MLB 1987)Family owned since 2017 · Ridgefield, NJ
620Min Credit Score To Qualify
3%Min Down Payment First-Time Buyers
49.99%Max DTI With AUS Approval
15%Investment Down Single-Family Rental
Your Answer Right Here
What Are Conventional Loans?
Conventional loans are home mortgages not insured or guaranteed by a federal agency like FHA, VA, or USDA. They follow underwriting guidelines set by Fannie Mae and Freddie Mac, which purchase most conventional loans from lenders. Because they are not government-backed, conventional loans require a stronger credit profile — but they reward that with lower rates, no upfront mortgage insurance, and flexibility on property types. According to the CFPB, conventional loans make up the majority of mortgages originated in the U.S. each year. As a mortgage broker, we shop multiple loan programs so you get the best conventional mortgage rate for your profile — not a single bank’s rate sheet.
Program Snapshot
Conventional Loan Options — Which Program Fits Your Goals?
Conventional financing breaks into two main categories: conforming loans within Fannie/Freddie limits, and jumbo loans that exceed them. Key programs at a glance:
Program
Loan Limit (2026)
Min Down Payment
Min FICO
Best For
Standard Conforming
Up to $832,750
3%
620
Most home buyers in NJ, CT, FL
Conforming High Balance
Up to $1,209,750
5%
620
The twelve high-cost NJ counties
Conventional 97
Conforming limits
3%
620
First-time or repeat buyers, low down
HomeReady / Home Possible
Conforming limits
3%
620
Low-to-moderate income buyers
Conventional Fixed 15-Year
Conforming limits
5%
620
Faster payoff, lowest total interest
Jumbo Conventional
Above $1,209,750
10%–20%
660
Luxury and high-value properties
Investment Property Conventional
Conforming limits
15%–25%
620
Rental properties, landlords
Visual Guide
Program Tiers — Which One Is Right for You?
The right conventional home loan depends on your down payment, credit score, and loan amount. Here is a visual overview of how the main program tiers stack up:
Conventional Loan Programs — 2026 guidelines. Down payments and loan limits vary by program, county, and property type.
Full Guidelines
Conventional Loan Requirements — Credit, Down Payment & Income
Fannie Mae and Freddie Mac set the guidelines our wholesale lenders underwrite to. Here are the key requirements for 2026:
● Conventional Loan Credit Score Requirements
Minimum FICO is 620. Borrowers between 620 and 679 face higher loan-level price adjustments. Scores above 740 get the best pricing. Fannie Mae publishes full LLPA tables. Below 620, an FHA loan starting at 500 may be the better fit.
● Down Payment for a Conventional Loan
Minimum 3% down for first-time buyers (Conventional 97 or HomeReady). Most buyers put down 5% to 20%. PMI is required below 20% down but cancels automatically at 20% equity — unlike FHA MIP which stays for the life of the loan. A 20% down payment eliminates PMI entirely.
● Debt-to-Income Ratio
Maximum DTI for a conventional loan is 45% under standard Fannie Mae guidelines. With a Desktop Underwriter (DU) Approve/Eligible finding, DTI may stretch to 49.99%. Your DTI is calculated by dividing your total monthly debt obligations by your gross monthly income.
● Income & Employment
A two-year employment history is required. W-2 employees provide 30 days of pay stubs and two years of W-2s. Self-employed borrowers provide two years of personal and business tax returns. Commission, rental, and investment income qualifies with a two-year documented history.
● Reserves & Assets
Most conventional purchase loans require two months of PITI in verified reserves after closing. Investment properties typically require six months. Reserves may be checking, savings, or retirement accounts (60% of vested balance), documented with two recent statements.
● Property Requirements
Conventional loans cover single-family homes, condos, 2- to 4-unit properties, and manufactured homes. Properties must be in good condition and appraised by a licensed appraiser. Condos must meet Fannie Mae project approval. Mixed-use and non-warrantable condos may require a Non-QM product.
Side-by-Side Comparison
Comparing Your Loan Options — Agency vs. Government-Backed
Feature
Conventional Loan
FHA Loan
Min Credit Score
620
500 (with 10% down); 580 (with 3.5% down)
Min Down Payment
3%
3.5% (580+ score)
Mortgage Insurance
PMI — drops off at 20% equity
MIP — stays for life of loan if down <10%
Upfront MIP
None
1.75% of loan amount
Loan Limit (2026)
$832,750 (conforming); higher in some counties
$541,287 base; higher in high-cost areas
Property Condition
More flexible
Stricter appraisal standards
Best When
Credit 620+, equity or larger down payment
Credit 500–619 or smaller down payment needed
Credit above 700 with 5% or more down? A conventional loan almost always costs less monthly — no upfront MIP and PMI cancels at 20% equity. Below 620? FHA is likely the better path. We run both scenarios before recommending a program. See our FHA loans in New Jersey page for a full side-by-side comparison.
How It Works
How the Conventional Mortgage Process Works
Here is what to expect from first contact to closing when you apply through Mortgage-World.com:
Step 1 — Pre-Approval
We review income and asset documents, then shop your profile across multiple loan programs to determine your maximum purchase price and rate options.
Step 2 — Application & Rate Lock
Once under contract, we submit the application, lock your rate at the best available price, and issue your Loan Estimate within three business days.
Step 3 — Processing
Our processor verifies documentation, orders the appraisal, and confirms title. Most files reach underwriting within 5 to 7 business days.
Step 4 — Underwriting
An underwriter reviews income, credit, assets, appraisal, and title. Most approvals include a short list of conditions to satisfy before closing.
Step 5 — Clear to Close
Conditions cleared, the underwriter issues Clear to Close. Your final Closing Disclosure arrives at least three business days before closing with exact costs and payment.
Step 6 — Closing & Funding
You sign at the closing table; purchase loans fund same day or next business day. Total timeline: typically 21 to 45 days from application.
Fannie Mae’s 97% LTV program guidelines are publicly available for borrowers who want to review the low down payment conventional options directly from the source.
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What is the minimum credit score for a conventional loan?
The minimum credit score for a conventional loan is 620. Borrowers between 620 and 679 face higher loan-level price adjustments. Scores of 740 or above receive the best pricing. Below 620, an FHA loan starting at 500 may be the better option.
How much down payment do I need for a conventional loan?
Minimum 3% down for first-time buyers using Conventional 97 or HomeReady. Most buyers put down 5% to 20%. Less than 20% requires PMI, which cancels at 20% equity. A 20% down payment eliminates PMI from day one. Second homes require 10% down; investment properties require 15% to 25%.
What is the conventional loan limit in 2026?
The 2026 conforming loan limit is $832,750 in most counties. High-cost areas qualify for more: $1,209,750 in northern New Jersey, $977,500 in the Greater Bridgeport and Western Connecticut planning regions, and $990,150 in Monroe County FL. Above that requires a jumbo conventional loan (minimum 10% down, 660 FICO).
Is PMI required on all conventional loans?
PMI is required when the down payment is below 20%. Unlike FHA MIP, conventional PMI cancels automatically under the Homeowners Protection Act when the balance reaches 80% of the original appraised value, and the lender must terminate it at 78% LTV. FHA MIP stays for the life of the loan in most cases.
Can I use a conventional loan to buy an investment property?
Yes. Conventional loans cover investment properties including single-family rentals and 2- to 4-unit properties. Requirements: minimum 15% down for single-family (25% for 2-4 units), 620 FICO, and six months of reserves. They carry lower rates than DSCR or portfolio loans for borrowers who can fully document income.
What documents do I need for a conventional loan?
Standard documents include two years of W-2s and tax returns, 30 days of pay stubs, two months of bank statements, a government ID, and current real estate information. Self-employed borrowers add two years of business returns and a year-to-date P&L. Refinances also need your current mortgage statement and homeowners insurance declarations.
What is the maximum debt-to-income ratio on a conventional loan?
45% under standard guidelines. With a Desktop Underwriter approval behind it, 49.99%. Above that you are outside conventional, and the next look is FHA, which goes to 56.99%.
Is a conventional loan cheaper than FHA?
Often, and it turns on your credit score. FHA charges an upfront mortgage insurance premium at closing and keeps its monthly premium for the life of the loan on most files. Conventional has no upfront premium, and the PMI comes off at 20% equity. In the low 620s FHA frequently prices better, because conventional pricing tightens as the score drops. Get both quoted on your own numbers before you decide.
How quickly can a conventional loan close?
Same week is achievable on a clean file. What holds one up is almost never the underwriting — it is an appraisal slot, a condo questionnaire nobody has returned, or a payoff letter still sitting with the other lender.
What happens if I need to borrow more than the conforming limit?
You are into jumbo. The limit is a hard line: at it you are conforming, a dollar over it you are not, and the rules change with the label — a higher score floor, more months of reserves, and no Fannie or Freddie purchase behind the loan.
Find out what a conventional loan costs on your numbers
Send your credit range, your down payment and roughly what you want to spend. A licensed loan officer will price conventional against FHA on your file and tell you which one is actually cheaper over the years you plan to keep it.
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