Simplifying Homes – Your Guide to Real Estate

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Conventional Home Loans

Learn everything you need to know about conventional mortgages.

Today’s Conventional Mortgage Rates
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01

Important Details & Requirements

Not backed by the government (unlike FHA, VA, USDA). Typically require a minimum 620 credit score, 3%+ down payment, and debt-to-income ratio under ~45%

02

Private Mortgage Insurance (PMI)

Required if down payment < 20%. Can be removed once equity reaches 20%. This affects monthly payment and cost over time.

03

Advantages of Conventional vs. Others

Lower overall cost for well-qualified buyers (due to no upfront funding fees like FHA/VA). Has more flexible property types (second homes, investments). Also offers faster closings and fewer restrictions.

Breaking it all down


The strict definition of conventional mortgages is the following: conventional mortgages are home loans that are not insured or guaranteed by a government agency, such as the FHA, VA, or USDA. They’re offered through private lenders and typically conform to guidelines set by Fannie Mae and Freddie Mac. To qualify, borrowers usually need a minimum credit score of 620, a stable income, a debt-to-income (DTI) ratio typically under 45%, and at least a 3% down payment. However, many borrowers put down 10–20% to strengthen their application and avoid additional costs. Because of the stricter qualification criteria, conventional loans tend to favor borrowers with strong credit profiles and reliable financial histories.


One key feature of conventional loans is private mortgage insurance (PMI), which is required if the down payment is less than 20%. Unlike FHA loans with upfront and monthly mortgage insurance premiums, PMI on conventional loans can be removed once the borrower reaches 20% equity. This makes them potentially more affordable over time for borrowers who can build equity quickly. Conventional loans also offer more flexibility than government-backed loans. These loans can be used for primary residences, second homes, or investment properties. For financially well-qualified buyers, conventional loans offer competitive interest rates, fewer fees, and faster closing times, making them a preferred choice in many scenarios.

Competitive interest rates

Conventional loans often offer lower interest rates for borrowers with high credit scores and strong financials. Lenders view these borrowers as low risk, which translates into better pricing. While FHA or VA loans may offer low rates too, conventional loans become more competitive when the borrower puts down more than 20% and has a credit score above 740.

Fewer fees


Unlike FHA loans, conventional loans don’t charge an upfront mortgage insurance premium (UFMIP). Instead, if the borrower puts down less than 20%, they pay private mortgage insurance (PMI)—which is often cheaper and can be canceled once the borrower reaches 20% equity. Conventional loans also tend to have fewer program-specific fees, especially for repeat or high-credit borrowers.

Faster closing times


Conventional loans generally close faster because they’re processed through private lenders without government agency involvement. There are fewer bureaucratic steps, no need for additional government approvals, and the underwriting process is more streamlined. This is especially helpful in competitive markets where speed can make or break a deal.

~62%

of financed home purchases in 2024 were with conventional mortgages – per consumeraffairs.com

740-750

average credit score of a conventional mortgage borrower

* can go down to 620

40-45 days

average time to close with a conventional mortgage

*can close in a week

15-20%

average down payment in the USA with a conventional mortgage

*3% down is possible

Documents to prepare for a Conventional loan

This list is not comprehensive or all-encompassing. Once an application is received, a specific and detailed list will be provided. Having these documents ready up front can significantly speed up the process and help avoid delays during underwriting.

Key documents

  • Personal Identification
    • Government-issued photo ID (driver’s license or passport)
    • Social Security number
  • Income Documentation
    • Pay stubs (typically last 30 days)
    • W-2 forms (last 2 years)
    • Tax returns (last 2 years, especially if self-employed)
    • Proof of additional income (e.g., bonuses, alimony, child support—if you want it considered)
    • Profit & Loss statement(s) (if self-employed or gig work)
  • Employment Verification
    • Employer name, address, and contact info
    • Employment history for the last 2 years
    • Written verification may be requested from employers
  • Asset & Bank Statements
    • Bank statements (last 2–3 months) for all checking and savings accounts
    • Documentation of large deposits (to verify they’re not new debt)
    • Retirement and investment account statements (if used for reserves or down payment)
  • Debt & Liability Info
    • Monthly debt payments (auto loans, student loans, credit cards, etc.)
    • Documentation of current mortgage or rent (if applicable)
    • Divorce decree (if applicable) to verify alimony/child support obligations
  • Property-Related Documents (once under contract)
    • Purchase agreement/contract
    • Real estate disclosures
    • Contact information for your real estate agent and title company

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