When buying a home, many people opt for a conventional loan, a type of mortgage that’s readily available from most lenders.
Conventional loans aren’t backed by a government agency, but they usually follow some government guidelines. Most conventional loans conform to loan limits set by the Federal Housing Finance Agency and follow the credit score and down payment minimums set by the government-sponsored enterprises known as Fannie Mae and Freddie Mac.
Here are the basic requirements for conventional loans.
Who can qualify for a conventional home loan?
In general, any borrower with solid credit and some money for a down payment will satisfy conventional loan qualification requirements.
However, because conventional loans aren’t insured or guaranteed by the government, their eligibility requirements for borrowers are usually tougher to meet than the requirements for government-backed mortgages. These include FHA loans, which are insured by the Federal Housing Administration; VA loans, guaranteed in part by the Department of Veterans Affairs; and USDA loans, the program run by the U.S. Department of Agriculture.
Also 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, for example, you might have more trouble qualifying.
Conventional loan credit score requirements
To qualify for a conventional loan, you’ll typically need a credit score of at least 620. Borrowers with credit scores of 740 or higher can make lower down payments and tend to get the most attractive conventional loan rates, however.
Conventional mortgage debt-to-income requirements
Mortgage lenders generally require a debt-to-income ratio (DTI) that's below 36% for conventional loans, though in some cases a lender may accept a higher DTI. Your DTI represents the total amount of your existing monthly debts (like rent or a car payment) divided by your pre-tax monthly income. Use a debt-to-income calculator to see where you stand.
» MORE: Learn why your DTI matters
Conventional loan down payment requirements
The minimum down payment required for a conventional mortgage is 3%, but borrowers with lower credit scores or higher debt-to-income ratios may be required to put down more. You'll also likely need a larger down payment for a jumbo loan or a loan for a second home or investment property.
Low-down-payment conventional loan programs like HomeReady and Home Possible are designed to help prospective home buyers with good credit scores but limited savings. If you put down less than 20% on a conventional mortgage, you’ll probably be required to pay for private mortgage insurance, or PMI.
Conventional 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 $548,250 in most U.S. counties, $822,375 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. It's generally easier to qualify for a conventional loan that falls below the conforming loan limit for your area.