Conventional Loans 2026: PMI, Down Payment & Requirements

Updated: July 2026 | Source: FHFA conforming loan limits · Freddie Mac PMMS (rates)

Conventional Loans 2026 — Complete Guide

Not backed by the government, but the most widely used mortgage in the US — with down payment options as low as 3% and the ability to drop mortgage insurance once you build equity.

Conventional loans reward strong credit and steady savings with better long-term costs than FHA. This guide covers exactly what you need to qualify, what PMI really costs, and how to get rid of it.

3%

Min. down payment (eligible first-time buyers)

620

Typical minimum credit score

0.3%–1.5%

Annual PMI (if under 20% down)

$832,750

2026 conforming loan limit

The myth people believe: You do not need 20% down for a conventional loan. Programs like Fannie Mae's HomeReady and Freddie Mac's Home Possible allow as little as 3% down for eligible buyers. The tradeoff is Private Mortgage Insurance (PMI) — which, unlike FHA's MIP, can be cancelled once you build enough equity.

Current Conventional Rates

Product	Rate	Source
30-yr Conventional Fixed	6.49%	Freddie Mac PMMS, week of July 9, 2026
15-yr Fixed	5.82%	Freddie Mac PMMS, week of July 9, 2026

Rates shown assume strong credit (740+) and 20% down. Lower credit scores or smaller down payments typically add 0.25–0.75% to your rate. Rates change daily — verify current pricing with an actual lender before locking.

Who Qualifies for a Conventional Loan

Credit Score	Minimum Down Payment	Notes
740+ Best pricing	3–5%	Access to the lowest rates and cheapest PMI
620–739	3–5%	Standard qualifying tier — most conventional borrowers land here
Below 620 Limited	Varies by lender	Some lenders now use holistic risk review instead of a hard score floor — worth shopping around

3% down isn't first-come-first-served. Fannie Mae's HomeReady and Freddie Mac's Home Possible programs offer 3% down but require your household income to fall under your area's income limit, and sometimes a homebuyer education course. Repeat buyers without income restrictions typically need 5% down minimum.

Private Mortgage Insurance (PMI) — What It Actually Costs

Credit Score	Typical Annual PMI Rate
760+	~0.46%
700–759	~0.6–0.9%
620–639	Up to ~1.5%

Example: $400,000 Home, 5% Down

Loan amount$380,000

PMI at 0.8% annually~$3,040/yr (~$253/mo)

PMI is temporary — this is the biggest advantage over FHA. Under the Homeowners Protection Act, your lender must automatically cancel PMI once your loan balance hits 78% of the original home value. You can request cancellation even earlier, once you reach 80% loan-to-value (LTV), through extra payments or a rising home appraisal.

2026 Conforming Loan Limits

Loans within these limits qualify as "conforming" and get conventional pricing. Go above the limit for your county, and the loan becomes a non-conforming ("jumbo") loan with stricter requirements.

Area Type	2026 Limit (1-unit)
Standard counties	$832,750
High-cost counties (parts of CA, HI, AK, Northeast corridor)	$1,249,125

Conventional vs. FHA — Quick Comparison

	Conventional	FHA
Min. down payment	3% (eligible buyers) / 5% standard	3.5%
Min. credit score	~620 typical	580 (500 with 10% down)
Mortgage insurance	PMI — cancellable at 20% equity	MIP — often life of loan
Best for	700+ credit, steady savings	Lower credit, smaller down payment

Other Conventional Loan Requirements

Beyond Credit Score and Down Payment

Debt-to-Income ratio (DTI)Typically 43–45%, up to 50% with compensating factors

Income history2 years of documented income/employment

Down payment sourcesSavings, gift funds, or eligible DPA programs

Conventional Loans and Down Payment Assistance

Conventional loans can pair with DPA too. Many state Housing Finance Agency programs work with conventional financing, not just FHA — some specifically layer on top of HomeReady or Home Possible to knock out the entire 3% down payment. Check StatewiseFinance's state-by-state guides for programs available where you're buying.

Official Resources

FHFA — Conforming Loan LimitsOfficial annual loan limit lookup by county Fannie Mae HomeReady3% down program details and income limits Freddie Mac Home Possible3% down program details and income limits CFPB Home Buying GuideOfficial consumer protection resources

Frequently Asked Questions

Do I really need 620 credit for a conventional loan?

620 is the traditional benchmark most lenders use, though some now use a broader risk assessment instead of a hard score floor. Even where allowed, better pricing and lower PMI costs generally require 700+, so it's worth improving your score before applying if you have time.

Can I remove PMI before I reach 20% equity?

Generally no — PMI cancellation requires reaching 80% loan-to-value (LTV) to request it, or 78% for automatic removal. Extra principal payments or a home value increase (confirmed by appraisal) can help you get there faster.

Is a 3% down payment program only for first-time buyers?

Not always. HomeReady and Home Possible are primarily income-based, not strictly first-time-buyer-only — if your household income falls within your area's limit, you may qualify even if you've owned a home before, depending on the specific program.

Should I choose Conventional or FHA?

Conventional tends to be cheaper long-term if you have 700+ credit and 5%+ saved, since PMI can be cancelled entirely. FHA makes more sense if your credit is below 680 or your down payment savings are limited, since it qualifies more easily but usually carries mortgage insurance for the life of the loan.

Bottom Line: Conventional loans reward strong credit and saved cash with lower long-term costs — the ability to cancel PMI entirely is a real financial advantage over FHA. If your credit is 700+ and you can put down at least 5%, run the numbers on conventional before defaulting to FHA.

Disclaimer: This post is for informational purposes only and does not constitute financial, legal, or mortgage advice. Program terms, rates, and eligibility requirements change frequently — verify all details directly with official program sources before making any financial decisions. StatewiseFinance.com is not affiliated with any government agency or lender listed in this post.