What is a conventional loan?

When you want to get a loan to buy a home, there are many different mortgage types to choose from. A conventional loan is a mortgage that is not backed by a government program or entity. This makes it different from other loan options, like FHA or VA loans.¹

Conventional loans make up the majority of all new loans originated by lenders. In April 2025, more than 75% of all new loans were conventional.

Given how common conventional mortgages are, it’s important for homebuyers to understand how they work. We’ll break down what you need to know.

How a conventional loan works

Conventional loans work like most mortgages:

• A borrower applies to a lender for a specific loan amount.
• The lender then reviews the borrower's qualifications and approves the loan if the requirements are met.
• After the loan is finalized and the borrower closes on their new home, they’ll repay the loan in monthly installments.

Most conventional loans are also conforming loans (versus nonconforming), which simply means that they meet the requirements for Fannie Mae or Freddie Mac. Both are government-sponsored enterprises that purchase mortgages from lenders and sell them to investors.

Because there are several different sets of guidelines that fall under the umbrella of conventional loans, there’s no single set of requirements for borrowers.

Conventional loan requirements

As with any type of mortgage loan, you’ll need to meet certain qualification requirements if you want to buy a home with a conventional loan. Let’s take a look at what you’ll generally need to qualify for this type of home loan.

• Down payment: It’s possible for first-time home buyers to get a conventional mortgage with a down payment as low as 3%. However, down payment requirements can vary. This mortgage calculator from Rocket Mortgage^® can help you figure out how your down payment amount will affect your future monthly payments.
• Private mortgage insurance: You’ll be required to pay for private mortgage insurance (PMI) if you put down less than 20% on a conventional loan. PMI protects mortgage investors in case a borrower defaults on the loan. The cost for PMI may vary based on your loan type, credit score, and down payment.
• Conventional loan limits: For a conforming conventional loan, your loan must fall within the loan limits set by Fannie Mae and Freddie Mac. For 2026, the conforming loan limit for a single-family home is $832,750. Areas such as Alaska, Hawaii, and Guam have higher limits. To see loan limits for your area, visit the Federal Housing Finance Agency website.
• Conventional loan minimum credit score: In most cases, you’ll need a credit score of at least 620 to qualify for a conventional loan.
• Conventional loan maximum debt-to-income ratio: Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes toward debt payments. Lenders may approve you for up to 45% DTI if you can show you have the financial means to pay your mortgage on time. However, a lower DTI increases your likelihood of approval.

Conventional loans tend to have stricter credit requirements than government-backed loans like Federal Housing Administration (FHA) loans.

Types of conventional loans

Conventional loans are simply mortgages that do not have government backing. They don’t all have identical terms and features.

For example, you can get a conventional loan with a repayment term of 15 years, 30 years, or some other term. A YOURgage^® from Rocket Mortgage^®2  gets you set your own repayment term from 8 to 29 years.

How interest is charged, the way the loan amortizes, and the amount you can borrow can also differ across various types of conventional loans. All of these types of loans fall under the umbrella of conventional loans.

• Fixed-rate mortgages. These loans have a set interest rate that does not change throughout the life of the loan.
• Adjustable-rate mortgages (ARMs). With an ARM, the interest rate of your loan and your monthly payment can change based on market rates and a schedule set when you get the loan.
• Conforming loans. Conforming loans are those that meet requirements such as maximum loan amount and minimum credit score set by Fannie Mae and Freddie Mac.
• Jumbo loans. Jumbo loans are loans for large amounts, typically greater than the conforming loan limit. You may borrow as much as $1 million, $2 million, or more if you meet a lender’s requirements.

How is a conventional mortgage different from other loan types?

Conventional mortgages are just one type of loan you can use to buy a home. If you’re considering applying for a mortgage, you should make sure you understand how conventional mortgages compare to other types of home loans.

Conventional loans vs. FHA loans

FHA loans, like conventional loans, are widely available without incredibly strict eligibility requirements. In fact, FHA loans are intended to help people who may struggle to qualify for a conventional loan buy a home. They have lower credit score and down payment requirements but do have downsides, such as requiring a mortgage insurance premium with few ways to eliminate it.

Conventional loans vs. VA loans

Unlike conventional loans, which anyone can apply for, VA loans have strict eligibility requirements. To be able to apply, you must be a member of the armed forces or a qualifying veteran.

If you are eligible, VA loans offer a number of benefits, such as no down payment requirement or mortgage insurance premiums. The table below will help you compare conventional loans vs. VA loans.

Conventional loans vs. USDA loans

Like VA loans, USDA loans are only for those who meet the criteria. They are designed specifically for people who want to purchase property in designated rural areas.

To be considered rural by USDA standards, an area must:

• Have no more than 10,000 residents; OR
• Have no more than 20,000 residents, not be located in a Metropolitan Statistical Area, and have a serious lack of affordable homes for low- and moderate-income families; OR
• Have no more than 35,000 residents, have once been considered rural but lost the status after the 1990, 2000, or 2010 Census, and have a lack of affordable mortgage options

You can use the USDA’s eligibility map to see if you can apply for a USDA loan to buy a home in your area.

USDA loans are also designed to be affordable loan options, so there is an income limit based on the median income in the area where the property is located.

Pros and cons of a conventional loan

Now that you have an understanding of what a conventional loan is, it’s important to think through whether it’s the right type of loan for your needs. Here are some advantages and disadvantages potential home buyers should consider before applying for a conventional mortgage.

Pros

There are many good reasons to consider applying for a conventional loan, including:

• Flexible loan options: There are a variety of loan terms available, such as a 30-year or 15-year mortgage. This allows you to choose loan terms that best fit your budget.
• Fewer property restrictions: Conventional loans can be used for second homes or investment properties, unlike government-backed loans.
• Competitive interest rates and terms: The better your credit score, the better your chance at lower interest rates.
• Option to remove private mortgage insurance: You don’t have to pay private mortgage insurance (PMI) if you make a down payment of at least 20%. Or if you reach 20% equity in your home, you can cancel your private mortgage insurance depending on the terms set by your lender. PMI is often less expensive compared to FHA mortgage insurance.

Cons

Conventional loans are widely available, but they’re not right for everyone. Before applying, consider these drawbacks.

• Stricter credit requirements: In order to get the most attractive interest rate and terms, you have to meet the higher credit score requirements.
• Higher down payment amounts: If you’re not a first-time home buyer, you may be expected to put down 5%, whereas down payments for FHA loans typically don’t change whether you’re a first-time buyer or not.
• Down payment affects private mortgage insurance: With a down payment of less than 20%, you’re required to pay for private mortgage insurance, which increases the overall cost of your loan.

FAQ

You can learn more about conventional loans by reading through these common questions many potential homeowners have about this type of mortgage.

What are interest rates for a conventional mortgage?

Interest rates for conventional mortgages change daily. You can see current rate updates for Rocket Mortgage^® here. Your credit score, down payment size, and other personal factors will also affect the interest rate you receive.

Are conventional loans assumable?

Generally, conventional loans are not assumable, though some exceptions do exist. An assumable mortgage is when a buyer takes over the seller's mortgage. Most government-backed mortgages are assumable, such as VA, FHA, and USDA loans.

Can I get down payment assistance with a conventional loan?

You may be able to qualify for down payment assistance with a conventional home loan. Government agencies and community programs offer assistance to buyers who are struggling with difficult financial situations, no matter what type of financing they’re using.

The bottom line: Conventional mortgages are a good fit for many buyers

Conventional mortgages are a typical mortgage that many people use to buy homes. They’re a good fit for the majority of buyers, which explains why the vast majority of new loans are conventional mortgages. If you can’t qualify for a specialized loan program like a VA loan or USDA loan, and you have strong credit, meaning you don’t need the easier qualification offered by FHA loans, you may want to consider using a conventional loan to buy your next home.

If you’re ready to start the homebuying process, you can apply for a conventional loan with Rocket Mortgage today.

¹ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

² Not available on FHA, VA or adjustable rate mortgages. Available for fixed rate conventional products only. 

³ To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply