Conventional Loan Requirements and Guidelines for 2020

Conventional loans require a 620-640 credit score but allow down payments as low as 3%.

Beth BuczynskiJanuary 29, 2020
Conventional Loan Requirements and Guidelines for 2019

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When buying a home, many people opt for a conventional loan, a type of mortgage that’s readily available from most lenders. Here’s a look at the qualification requirements.

What is a conventional loan?

Conventional loans aren’t backed by a government agency, but they do follow some government guidelines. Most conventional loans conform to loan limits set by the Federal Housing Finance Agency (FHFA), and follow the credit score and down payment guidelines set by the government-sponsored enterprises known as Fannie Mae and Freddie Mac.

Because conventional loans aren’t insured or guaranteed by the government, their eligibility requirements for borrowers are usually stricter than the requirements for FHA, VA or USDA mortgages. When it comes to the property itself, the opposite is true: Government mortgage programs tend to have stricter appraisal requirements than conventional loans.

Who qualifies for a conventional home loan?

In general, any borrower with good credit and some money for a down payment will satisfy conventional loan qualification requirements. Keep in mind that conventional lenders are free to enforce requirements that are stricter than the guidelines set by the FHFA, Fannie and Freddie. If you’re applying for a conventional mortgage after foreclosure or bankruptcy, it might be tougher to qualify, for example.

Conventional loan credit score requirements

To qualify for a conventional loan, you’ll typically need a credit score of at least 620-640. Borrowers with higher credit scores can make lower down payments and tend to get the most attractive conventional mortgage rates, however.

Conventional loan down payment requirements

The minimum down payment required for a conventional mortgage is 3%, but borrowers with lower credit scores may be required to put down more.

Low-down-payment conventional loan programs like HomeReady and Home Possible were designed to help prospective home buyers with good credit scores but limited savings. If you put down less than 20%, you’ll probably be required to pay for private mortgage insurance, or PMI.

Conventional mortgage loan limits

The maximum amount you can borrow with a conventional mortgage depends on the type of conventional mortgage you choose — conforming or nonconforming.

Conforming conventional loan: Loan limits for conforming conventional loans are set by the FHFA. The current maximum is $510,400 in most U.S. counties, $765,600 in high-cost areas and even more in some cities in California and Hawaii.

Nonconforming conventional loan: Lenders are free to set their own limits for nonconforming conventional loans, which include jumbo loans. In most cases, jumbo loans are capped around $1 million to $2 million, depending on the borrower's financial situation.

Find your conventional loan limit

While there isn't a conventional loan limit per se, conventional mortgages must comply with the local FHFA limit to be considered conforming.

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