Conventional Loan
The most widely used mortgage in America — flexible terms, no government involvement, and the potential to eliminate mortgage insurance entirely. A strong fit for buyers with a clear path to homeownership and the flexibility to finance primary, second, or investment homes.
3 minutes · No hard credit pull · No obligation
What Is a Conventional Loan?
The definitive workhorse of the mortgage market — and for good reason.
A conventional loan is any mortgage not insured or guaranteed by a federal agency. Instead, these loans are originated, underwritten, and typically sold to Fannie Mae or Freddie Mac — the two government-sponsored enterprises that set the rules for the mainstream mortgage market. Because there's no government backing, lenders rely more heavily on the borrower's own creditworthiness, income stability, and down payment.
Most conventional loans are "conforming," meaning the loan amount falls at or below the limit set annually by the Federal Housing Finance Agency (FHFA). That limit runs higher in designated high-cost areas like much of Southern California. Loans above that threshold are called jumbo loans and carry different guidelines.
Terms typically run 10, 15, 20, or 30 years. You can choose a fixed rate — where your payment stays the same for the life of the loan — or an adjustable rate (ARM), where the rate is fixed for an initial period and then adjusts periodically. Fixed rates are more popular for borrowers planning to stay long term; ARMs can make sense for those who expect to sell or refinance within a few years.
Who Is This Right For?
Conventional loans work well in a wide range of situations — here are the profiles that benefit most.
01
Buyers with solid credit and steady income
If you have documented, consistent income — W-2 or salary — and a track record of paying your bills on time, conventional financing typically comes with fewer restrictions and the flexibility most buyers want. Strong credit can unlock better terms, and we'll tell you exactly where you stand.
02
Buyers putting 20% or more down
Put 20% down and you skip Private Mortgage Insurance (PMI) entirely, trimming your monthly payment. This is one of the most tangible advantages conventional loans hold over government-backed programs.
03
Move-up buyers and repeat homeowners
Borrowers selling one home and buying another often have significant equity to deploy as a down payment, making conventional the natural choice. Conventional also allows purchase of second homes and investment properties, where government-backed programs have restrictions.
04
Buyers who qualify for low-down-payment options
Fannie Mae's HomeReady and Freddie Mac's Home Possible programs allow as little as 3% down for qualifying borrowers, often with reduced mortgage insurance. These programs are designed for first-time buyers and those in moderate-income brackets. We'll help you see if you qualify.
05
Borrowers seeking flexibility in property type
Conventional loans can be used for primary residences, vacation homes, and rental properties. FHA and VA loans are limited to primary residences, so conventional is often the only conforming option for investment or second-home purchases.
Key Requirements & How It Works
Here's what lenders evaluate and what you can expect from the process.
- Flexible credit requirements
- Conventional loans work for a wide range of credit profiles, and stronger credit can unlock better terms. Wherever your score lands, we'll tell you exactly where you stand and what it means for your options — no guesswork.
- Down payment: as little as 3%
- First-time buyers can put as little as 3% down through HomeReady or Home Possible. Put more down and your monthly mortgage insurance shrinks — and at 20% down, PMI disappears entirely. A larger down payment can also strengthen your overall terms.
- Manageable monthly debt
- Lenders look at your total monthly debt payments — including the new mortgage — against your income to make sure the payment fits comfortably. There's real flexibility here, especially when you bring strengths like reserves or strong credit. We'll run your numbers and show you the full picture.
- PMI when you put less than 20% down
- Private Mortgage Insurance applies whenever you put less than 20% down, and the cost varies based on your credit and down payment. The big advantage: with a conventional loan, PMI can be removed once you reach 20% equity — unlike FHA's mortgage insurance, which often lasts for the life of the loan.
- Conforming vs. jumbo
- The conforming loan limit is set each year by the FHFA and runs higher in high-cost areas like parts of Southern California. Loans above the applicable limit are jumbo loans, which qualify separately. Lumin will confirm exactly where your loan amount falls — you won’t have to guess.
Why Lumin for Your Conventional Loan?
As a licensed mortgage broker (NMLS #2716106), Lumin Lending shops your file across 40+ wholesale lenders — not just one bank's rate sheet. That independence means we can match your specific credit profile, down payment, and property type to the lender that fits it best. On a conventional loan, the difference between the right and wrong lender adds up over the life of the loan.
Our veteran-led team also brings discipline and directness to every file. We'll walk you through your terms, explain how PMI works, and tell you exactly when you can eliminate it. No surprises at closing, no buried fees, and no upselling products you don't need. That's the Lumin standard — honest brokerage, backed by real conversations.
Conventional Loan — common questions
How much do I need to put down on a conventional loan?
Qualified buyers can put as little as 3% down on some conventional programs. At 20% down you avoid private mortgage insurance (PMI) entirely; between 3% and 20%, PMI applies but drops off once you reach enough equity.
What credit score do I need for a conventional loan?
Most conventional programs look for a 620+ score, and pricing improves meaningfully as scores rise. Because we shop 40+ lenders, we can often find better pricing for a given score than a single bank would quote.
Conventional vs. FHA — which is better for me?
It depends on your credit, down payment, and how long you'll keep the home. FHA is more forgiving on credit but carries mortgage insurance that can last the life of the loan. We run both side by side and show you the real numbers before you choose.
What is the conforming loan limit?
Conforming limits are set by county and adjusted annually — high-cost areas like Orange County carry higher limits than the national baseline. If your loan amount is above the limit, a jumbo loan applies; we'll confirm the current limit for your county.
Related programs
Not sure if a conventional loan is your best fit?
Tell us about your situation and we'll give you a clear, no-pressure breakdown of your options — down payment, PMI, and total payment included.
3 minutes · No hard credit pull · No obligation