Conventional loan: What it is and how to get one in 2026

Core Insights - Conventional loans are the predominant choice for borrowers, accounting for over 77% of all mortgages originated in 2023 [1] - These loans are not insured by the government and have specific requirements that can vary by lender [2][3] Group 1: Types of Conventional Loans - Conventional loans can be categorized into conforming and non-conforming loans, with conforming loans adhering to standards set by Fannie Mae and Freddie Mac [2][3] - Conforming loan limits for 2025 are set at $806,500 for single-family homes in most counties, increasing to $832,750 in 2026 [8] - Jumbo loans exceed conforming limits and typically require higher credit scores and down payments [11] Group 2: Loan Features and Requirements - Conventional loans offer flexibility with down payments as low as 3%, but private mortgage insurance (PMI) is required if the down payment is below 20% [9][26] - Borrowers typically need a credit score of 620 or higher and a debt-to-income ratio of 50% or less, with many lenders preferring a DTI of 41% or less [26][33] - Fixed-rate and adjustable-rate mortgages are available, with fixed-rate mortgages providing consistent payments throughout the loan term [12][13] Group 3: Comparison with Other Loan Types - Conventional loans are contrasted with government-backed loans like FHA, VA, and USDA loans, which cater to borrowers with lower credit scores or limited savings [5][19] - FHA loans require a minimum credit score of 500 with a 10% down payment, while VA loans require no down payment for eligible military personnel [19][21][22] - Conventional loans may have higher credit score requirements compared to FHA or USDA loans, making them potentially harder to qualify for [26][30]