Conventional loans are the most common mortgage in America for a reason — eligible buyers with 620+ credit may qualify for as little as 3% down, and unlike FHA, mortgage insurance cancels automatically once you reach 20% equity. Here's how it compares and who it actually fits.
Conventional loans aren't backed by a government agency the way FHA, VA, and USDA loans are — they're issued and serviced by private lenders, and most follow guidelines set by Fannie Mae and Freddie Mac so they can be sold on the secondary mortgage market. That's what "conforming" means: the loan amount and borrower profile fit within Fannie Mae and Freddie Mac's published guidelines.
The minimum credit score most lenders look for is 620, though pricing improves meaningfully as your score climbs — borrowers in the 740+ range consistently get the best rates and lowest PMI costs. Since November 2025, Fannie Mae's automated underwriting system no longer enforces a hard minimum credit score floor, instead using a broader risk assessment — but in practice, most lenders still set their own 620 working minimum.
Down payment requirements are more flexible than most buyers assume. First-time homebuyers with strong overall profiles can often qualify for 3% down through programs like HomeReady or Home Possible. Repeat buyers and those above certain income limits typically see a 5% minimum. The well-known 20%-down rule isn't a requirement — it's simply the threshold where Private Mortgage Insurance (PMI) goes away.
That PMI distinction is the single biggest functional difference from FHA. Conventional PMI cancels automatically once your loan balance drops to 78-80% of the home's original value — typically 7-10 years into a standard amortization schedule, faster if you make extra payments. FHA's mortgage insurance, by contrast, often lasts for the entire loan term if you put down less than 10%. For buyers planning to stay in a home long-term, that difference can mean tens of thousands of dollars saved over the life of the loan.
"High credit score = conventional, low credit score = FHA" is the common shorthand, but it's too simple a way to make this decision. Here's what actually matters.
| Factor | Conventional | FHA |
|---|---|---|
| Min. credit score | 620 (740+ for best pricing) | 580 |
| Min. down payment | 3% (first-time) / 5% typical | 3.5% |
| Mortgage insurance | Cancels at 20% equity | Often life of loan |
| Best for long-term hold | Yes — MI eventually disappears | No — refinance later to drop MIP |
| Best for lower credit | Harder under 620 | More forgiving down to 580 |
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