Chapter 1
IN THIS LESSON
Understanding Conventional Financing
Conventional financing is one of the most common mortgage options available to homebuyers. Learn how conventional loans work and why they may be a strong option depending on your credit, income, down payment, and financial goals.
You'll learn: Conventional loan requirements, down payment options, mortgage insurance, credit considerations, and how conventional financing compares with other loan programs.
Conventional Mortgage: The Basics
-
A Conventional loan is a non-government-backed mortgage that can offer flexible financing options for qualified borrowers.
-
There is no universal minimum credit score requirement under current conventional guidelines, but credit score still plays an important role in approval, pricing, and available terms.
A 620+ score may be possible with a stronger overall financial profile, while 680+ can provide access to more favorable qualification scenarios. Your credit, income, assets, debts, and down payment all factor into approval.
-
Eligible first-time homebuyers may qualify for as little as 3% down. Borrowers who already own a home or have owned one within the past three years may qualify for options requiring 5% down, depending on the program.
-
Private Mortgage Insurance (PMI) may be required when putting less than 20% down. With 20% down, PMI is generally not required, and on applicable loans with PMI, it can typically be removed once the loan reaches 80% loan-to-value, subject to program requirements.
-
A 47% DTI or below may be a common target for certain conventional scenarios, although maximum DTI can vary based on the borrower's overall financial profile and loan characteristics.
-
Conventional financing can be used for eligible 1–4 unit properties, including:
Primary residences
Second homes or vacation homes
Investment properties
-
Conventional financing offers flexibility for a wide range of homebuyers and property types. With options for low down payments and the potential to avoid or eventually eliminate PMI, it can be a strong choice for qualified borrowers.