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Current conventional mortgage rates

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What is a conventional mortgage?

A conventional mortgage is a home loan that isn’t insured by a government agency. Virtually every type of mortgage lender offers conventional loans, and they are ideal for borrowers with a strong credit profile, stable income and minimal debt.

Conventional loans can come with a fixed or adjustable rate, and they can be conforming, meaning they fall within the loan limits set by the Federal Housing Finance Agency (FHFA), or non-conforming in that they exceed these limits. In 2022, the conforming loan limit is $647,200 in most areas, and $970,800 in pricier markets.

Conventional loan requirements and qualifications

Conventional loans often have stricter borrower requirements than government-insured FHA, VA and USDA loans. In general, to qualify for a conventional loan, you’ll need:

  • A 620 minimum credit score
  • 3%-5% minimum down payment
  • Maximum 43% debt-to-income (DTI) ratio
  • At least two years of consistent employment and steady income

Although these are the minimum standards, there are exceptions (for example, some lenders allow up to a 50 percent DTI ratio). As with any type of mortgage, to qualify for the best rates, you’ll need a good to excellent credit score.

Some conventional loan programs allow you to put down as little as 3 percent to 5 percent, but the tradeoff is you’ll need to pay for private mortgage insurance (PMI), a cost added on to your monthly mortgage payment. PMI protects the lender — not you — if you default on your loan, and you’ll need to pay this until you accumulate 20 percent equity in your home. If you can make at least a 20 percent down payment upfront instead, you won’t have to pay this expense.

The down payment requirement for a conventional loan can also depend on what type of property you’re financing. If you’re buying an investment property, for instance, you might be required to put down at least 15 percent.

Who should consider a conventional loan?

Any borrower with solid credit, low debt and established income could benefit from a conventional loan. They are available to first-time and trade-up homebuyers, those who are downsizing, single-family or multi-family investors and more.

If you’re considering a conventional loan, here’s how it stacks up against the general requirements for different government-insured loans:

Conventional loan requirements

  • 620 credit minimum
  • 3%-5% down payment
  • Mortgage insurance if less than 20% down
  • 43% maximum DTI

FHA loan requirements

  • 580 credit minimum
  • 3.5% down payment
  • Mortgage insurance if less than 20% down
  • 43%-57% maximum DTI

VA loan requirements

  • No credit minimum
  • No down payment
  • Funding fee, but no mortgage insurance
  • 41% maximum DTI
  • For eligible military members, veterans and surviving spouses

USDA loan requirements

  • No credit minimum
  • No down payment
  • Guarantee fees, but no mortgage insurance
  • 41% maximum DTI
  • For borrowers in eligible locations and within income limits

Pros and cons of conventional loans

Pros

  • Can be used to finance a range of property types
  • No loan limit
  • Lower down payment acceptable
  • Can cancel PMI when you reach equity threshold
  • No upfront mortgage insurance premium

Cons

  • Can be harder to qualify with a lower credit score
  • Can have higher interest rates
  • PMI if less than 20 percent down