The most common loan option—explained simply
When most people think of a “standard” mortgage, they’re usually thinking about a conventional loan. These loans make up the majority of home purchases in the U.S. and are often the best option for buyers with solid credit and stable income.
But “conventional” doesn’t mean basic or inflexible. Here’s a simple breakdown of how conventional loans work—and when they make the most sense.
What Is a Conventional Loan?
A conventional loan is a mortgage not backed by a government agency like FHA, VA, or USDA. Instead, it follows guidelines set by Fannie Mae and Freddie Mac.
Because there’s no government insurance, approval and pricing are more closely tied to your credit profile, down payment, and overall financial strength.
Down Payment Options
One of the biggest myths is that conventional loans require 20% down. In reality, buyers can often put down much less:
- 3% down for qualified first-time buyers
- 5% down for many repeat buyers
- 10–20% down to reduce monthly costs
- 20%+ down to avoid mortgage insurance entirely
This flexibility makes conventional loans accessible to a wide range of buyers.
How PMI Works on Conventional Loans
If you put down less than 20%, you’ll typically pay Private Mortgage Insurance (PMI).
The upside? PMI on conventional loans is:
- Based heavily on credit score
- Often cheaper than FHA mortgage insurance
- Cancelable once you reach 20% equity
This makes PMI a temporary cost—not a lifetime one.
Credit Score Impact
Credit scores play a major role in conventional loans:
- 620 is typically the minimum
- Higher scores = lower interest rates
- Higher scores = cheaper PMI
Even small improvements in your credit score can lead to meaningful monthly savings.
When Conventional Beats Other Loan Options
Conventional loans often make the most sense when:
- You have good to excellent credit
- You want PMI that can be removed
- You’re putting at least 5% down
- You’re planning long-term ownership
Many buyers move from FHA into conventional later—but starting conventional can save money upfront and over time.
How Affinity Home Lending Helps Buyers Use Conventional Loans Strategically
We help buyers:
- Compare conventional vs. FHA side-by-side
- Optimize credit for better pricing
- Choose smart down payment strategies
- Plan PMI removal timelines
- Secure fast, accurate approvals
A conventional loan is powerful when it’s structured correctly.