Conventional home loans are mortgages that are not insured or guaranteed by the government.

Private mortgage lenders typically service conventional loans. These banks, credit unions, and other financial entities often also offer government-backed mortgage loans. In general, conventional home loans don’t have some of the perks as government-insured loans, but have low-interest rates, flexibility, and high loan limits.

Conventional Loan Requirements

Conventional lenders often set more strict requirements than government-backed loans. For example, a borrower with a credit score under 620 won’t be eligible for a conventional loan but would most likely qualify for an FHA loan.

Home buyers who can qualify for conventional loans should strongly consider this type of loan because it’s likely to provide less costly borrowing options. Conventional loans are best for borrowers who meet the minimum credit score, DTI, and other requirements for conforming loans and who don’t need a loan larger than current conforming loan limits.

Here are the typical conventional loan requirements:

Credit– The minimum credit score is typically between 620-640 depending on the lender.

Occupancy– Conventional loans can be used to finance a primary residence, a second home, a vacation property, or a rental property. This is in contrast to government-backed loan programs which can only be used to finance a primary residence.

Property Type– Single-family homes, duplexes, 2-4 unit properties, condominiums, and townhouses are eligible.

Income– Income will be verified by reviewing recent paycheck stubs, tax returns, and W-2s. Debt-to-Income Ratio must not exceed 43%.

Assets– Bank and investment statements will be verified to ensure the borrower has sufficient assets to close. These funds must be able to cover a down payment plus associated closing costs.

Benefits of Conventional Loans

Competitive Interest Rates

Because your interest rate on a conventional loan is tied to your creditworthiness, among other factors, a high credit score can help you qualify for a low-interest rate. And while a low down payment can result in you paying private mortgage insurance, you can request to have the insurance requirement removed once your loan-to-value ratio reaches 80%.


Private mortgage lenders have more flexibility with conventional loans than they do with government-insured loans, primarily because they don’t need to follow the guidelines set by those government agencies.

As a result, you may have an easier time finding a conventional loan with flexible down payment options and term lengths, not to mention opportunities to get a loan if your credit doesn’t meet the standards for a government-insured or conforming loan.

High Loan Limits

While conforming loans do have limits, you can go even higher with jumbo conventional loans if you need to. You may not get that kind of flexibility with government-insured loans.

7 Types of Conventional Loans

Conventional loans can be conforming or non-conforming. Let’s look at 7 different types of conventional loans.

1. Conforming Loans

Conforming loans are the subset of conventional loans that adhere to a list of guidelines issued by Fannie Mae and Freddie Mac, two unique mortgage entities created by the government to help the mortgage market run more smoothly and effectively. The guidelines that conforming loans must adhere to include a maximum loan limit, which is $647,200 in 2022 for a single-family home in most U.S. counties.

Who are they best for? Borrowers who meet the minimum credit score, DTI, and other requirements for conforming loans and who don’t need a loan larger than current conforming loan limits.