What is a conventional mortgage?

A conventional loan is not government-insured. Most conventional mortgages are offered by private lenders and meet the standards of government-sponsored enterprises Fannie Mae and Freddie Mac (hence, also known as conforming loans). Most people choose conventional loans which are either 15- or 30-year loan terms. The conforming loan limit for a single-family home is $726,200 in most states with Alaska and Hawaii being the exceptions.

You may be able to get a conventional mortgage for a down payment as low as 3% depending on your financial situation and property type. You may also need to get private mortgage insurance if you make a down payment of less than 20%. You’ll need to have a credit score of at least above 620 to qualify for good rates. Your debt-to-income (DTI) ratio cannot exceed 50%, though having a lower DTI means better chances of approval. Conventional loans also have stricter credit score requirements than government-backed loans.