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When it comes to financing a home, conventional loans remain one of the most popular and flexible options available. Whether you’re a first-time buyer or a homeowner looking to make a move, understanding the requirements and benefits of conventional loans can help you make smarter financial decisions. This guide will break down conventional loan requirements, benefits, and when they may be the right choice for you.
A conventional loan is a mortgage that isn’t insured or guaranteed by the federal government. Instead, it’s offered through private lenders such as banks, credit unions, and mortgage companies.
Conventional loans are available in two main types:
The typical eligibility requirements for a conventional loan are as follows:
| Credit Score Requirements |
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| Down Payment |
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| Debt-to-Income (DTI) Ratio |
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| Loan-to-Value (LTV) Ratio |
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| Loan Limits |
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| Income and Employment Verification |
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| Property Requirements |
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Conventional loans come with several perks that make them attractive compared to government-backed options:
If you make a 20% down payment, you can avoid private mortgage insurance. Even if PMI is required, it can be canceled once your equity reaches 20%.
Conventional loans can be used for higher loan amounts up to conforming loan limits. For instance, the 2025 conforming loan limit in Washington State is $806,500 in most counties, and higher in designated high-cost regions.
Choose from fixed-rate mortgages (15, 20, 30 year terms) or adjustable-rate mortgages (ARMs). This flexibility helps you tailor your mortgage to your financial goals.
Conventional loans are not restricted to primary residences. You can finance second homes, vacation homes, or rental investment properties, which is not always possible with FHA or USDA loans.
Borrowers with strong credit often receive lower interest rates than they would with other loan types.
Because they aren’t subject to government program rules, conventional loans may have streamlined processing times.
Many homebuyers compare conventional loans to FHA loans. Here’s a quick breakdown:
| Conventional Loans | FHA Loans | |
| Minimum Credit Score | 620+ | 580 (for 3.5% down payment) |
| Down Payment | As low as 3% | As low as 3.5% |
| Mortgage Insurance | Required if <20% down (cancelable with 20% equity) | Required for the life of the loan |
| Eligible Properties |
|
Primary residences only |
| Loan Limits | Yes | Yes |
If you’re preparing to apply, here are some tips to help improve your approval odds:
| Check Your Credit Score | Aim for 700+ for the best terms. |
| Save for a Down Payment | Even 5–10% down makes you a stronger candidate. |
| Lower Your Debt-to-Income Ratio | Pay down credit cards, personal loans, and other debts. |
| Organize Documentation | Have pay stubs, tax returns, and bank statements ready. |
| Get Pre-Approved | Getting pre-approved gives you a clear idea of your buying power and shows sellers you’re a serious buyer. |
The following programs make conventional loans more accessible for first-time home buyers:
These programs are ideal for buyers in Seattle, Denver, San Francisco, and other competitive markets where affordability is key.
Before applying for a conventional loan to buy a home, be sure to weigh its perks and potential drawbacks.
A conventional loan is often the best choice for:
As little as 3% for qualified borrowers.
You’ll need at least a credit score of at least 620. The lower your credit score, the higher the rate you might pay.
PMI is insurance required when your down payment is less than 20%, protecting the lender if you default on the loan.
Once you reach 20% equity, you can request PMI cancellation.
No, unlike USDA loans, there are no strict income limits.
Yes, unlike FHA loans, you can use them for second homes and rentals.
No government backing, flexible terms, and potentially lower costs if you have good credit and a sizable down payment.
Proof of income (pay stubs, tax returns), credit history, and bank statements may be required.
Yes, conventional loans are frequently refinanced to lower interest rates or change loan terms.
Conforming loans meet Fannie Mae and Freddie Mac guidelines; non-conforming loans exceed loan limits or have different standards.
Yes, they are widely available and often the most common choice for first-time buyers.
A conventional loan is one of the most popular mortgage options in the U.S. for good reason—it balances flexibility, cost savings, and long-term financial benefits. While qualifying may be more demanding than with government-backed loans, the rewards include cancelable PMI, competitive rates, and the ability to finance a wide range of properties. Before deciding on a loan program, make sure you’re choosing the right fit for your financial situation.
Are you ready to buy a home and want to use a conventional loan to finance it? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington serving the entire state, as well as Oregon, Idaho, Colorado, and California. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages, or visit our website to get an instant rate quote.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.