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Conventional mortgages are the ‘traditional’ mortgage most people think of when they talk about home loans. It doesn’t have government backing like FHA and VA loans have and is the reason they generally have stricter guidelines.
Conventional mortgages are the most common type of home loan in the United States. Unlike FHA or VA loans, they are not backed by a government agency. Instead, they follow guidelines set by Fannie Mae and Freddie Mac, which is why they are often called "conforming" loans. Because lenders can sell these loans to Fannie Mae and Freddie Mac, they are widely available and offer competitive rates and terms.
For 2026, the Federal Housing Finance Agency (FHFA) has set the conforming loan limit for a single-family home at $832,750 in most counties across the country. In designated high-cost areas, the limit can go as high as $1,249,125. These limits are updated each year to keep pace with rising home values. For multi-unit properties, the 2026 limits are:
A loan within applicable limits may qualify as conforming if it meets other program requirements. Rates and terms depend on the borrower, property and lender.
A conventional loan does not always require a large down payment. Eligible buyers may have access to lower-down-payment programs; private mortgage insurance (PMI), closing costs and other expenses can apply. PMI cancellation depends on the loan and applicable requirements.
HomeReady® – A lower-down-payment option for eligible borrowers, subject to income, property and lender requirements. Eligible gift, grant or assistance funds may help cover upfront costs.
Conventional 97 – A lower-down-payment option for eligible buyers of qualifying primary residences. First-time buyer and other program requirements apply; ask about eligible gift funds and closing costs.
Home Possible® – A lower-down-payment option for eligible borrowers, subject to income, property and lender requirements. Eligible gift, grant or other assistance funds may help cover upfront costs.
HomeOne® – A lower-down-payment option that may be available to eligible first-time buyers of qualifying primary residences. Ask your lender about gift funds, assistance and current program terms.
If your down payment is less than 20%, you will pay PMI as part of your monthly mortgage payment. However, unlike FHA loans where mortgage insurance typically remains for the life of the loan, conventional loan PMI can be canceled. Once your loan balance reaches 80% of the home's original value, you can request removal of PMI. It is automatically removed when you reach 78% of the original value. This makes conventional loans an attractive long-term option even when starting with a smaller down payment.
As of November 2025, Fannie Mae removed the hard 620 minimum credit score requirement for loans processed through its Desktop Underwriter (DU) automated underwriting system. This means DU now evaluates your complete financial profile – income stability, assets, debt levels, and payment history – rather than automatically rejecting applications based solely on a credit score number. Fannie Mae also now accepts VantageScore 4.0 and FICO 10T in addition to classic FICO scores, and can consider alternative payment data like rent, utility, and cell phone payments for borrowers with limited credit histories.
This is great news for borrowers who may have credit scores below 620 but have strong compensating factors like a larger down payment, significant savings, low debt, and stable employment. Keep in mind that individual lenders and PMI companies may still maintain their own credit score overlays, so it is important to work with a lender who has adopted the updated guidelines. Note that manually underwritten loans still require a minimum 620 credit score – this change applies only to loans processed through DU's automated system.
Conventional loans make up the largest share of mortgages written today. While they have somewhat stricter qualifying requirements than government-backed loans, they are very accessible for borrowers who meet the basic criteria:
The conventional loan application process is straightforward. You will need to provide documentation to verify your income, assets, and financial history:
Your underwriter may request additional documents based on your specific situation. The appraisal and title work round out the process, which typically takes just a few weeks from application to closing.
Conventional financing offers options for eligible Colorado buyers and homeowners. Compare available down payments, rates, APRs, mortgage insurance and closing costs to assess which option fits your needs.
I have worked with conventional loans for many years and have helped my clients navigate every option to find the best loan for their situation. Let's discuss your financial goals today to see if conventional loan financing is right for you.
