What Is a Conventional Mortgage?

Types and features of conventional mortgages

A conventional loan can be either conforming or nonconforming, depending on whether it meets Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac requirements. And the amount of interest you’ll pay depends on a number of factors, including whether you have a fixed- or adjustable-rate mortgage.

Conventional home loan types

Here’s what you need to know about the different types of conventional home loans.

• Conforming: These must meet FHFA, Fannie Mae and Freddie Mac requirements. Each year, the maximum loan limit changes based on the housing market and the area. Some states have higher limits than others. Conforming loans are the most popular mortgage type.
• Nonconforming: These loans do not meet the requirements to be acquired by Fannie Mae or Freddie Mac. It’s not uncommon for investment properties or second homes to be nonconforming loans.
• Jumbo: Jumbo loans are a type of nonconforming loan for higher-priced homes that exceed the maximum loan limit. To be eligible for a jumbo loan, you need good credit and a large down payment.

Fixed-rate vs. adjustable-rate mortgages

ARMs typically come with a lower interest rate that is fixed for three to five years before fluctuating.

Whichever loan type you go with, you may have the option between a fixed-rate mortgage and an adjustable-rate mortgage (ARM). With a fixed rate, your interest rate stays the same for the duration of the loan, which means your monthly payments remain the same. Typically, fixed-rate loans come in 15- or 30-year terms, but some lenders might offer other options.

ARMs, on the other hand, have a fixed rate for a specific time and then an interest rate that can fluctuate over time based on market conditions. This means your monthly payment can go up or down. For example, if you choose a 5/1 ARM, for the first five years you will have a fixed interest rate, and then your interest rate will be adjusted each year afterward.

What affects conventional mortgage interest rates?

A variety of factors influence mortgage interest rates. While some factors are out of your control, such as a home’s location, you can directly control others, such as your down payment amount.

• Location: The state or even the county where the home is located may impact your interest rate, as lenders might have slightly different rates depending on geographic location.
• Credit score: Even if you can get a loan with a less-than-ideal credit score, borrowers with higher credit scores generally snag lower interest rates. As you prepare to buy a home, try to improve your credit score as much as possible so you can potentially get a more favorable rate.
• Down payment: Another factor you can control is the amount you pay down on the house. In general, a bigger down payment means lower interest rates (and less money that you’ll have to borrow).
• Loan term: Conventional loans with shorter terms typically have lower interest rates than those with longer terms. For example, you may want to compare a 15-year and a 30-year mortgage to see the difference in the interest rate the lender offers you.

» MORE: How much house can I afford?

Conventional mortgage requirements

Conventional mortgage requirements differ slightly by lender. However, most conventional mortgage lenders have these eligibility standards:

• Credit score: In November 2025, Fannie Mae removed hard minimum credit score requirements for loans run through its Desktop Underwriter system. But traditionally, you should try to have a credit score of at least 620 (or 680-plus for jumbo loans). A higher credit score can help you qualify for better rates.
• Debt-to-income (DTI) ratio: Your DTI ratio should absolutely be no higher than 50%, but many lenders prefer it to be lower, ideally 36% or less.
• Down payment: Conventional mortgages often require at least 3% down, although this can vary by the lender, your profile as an applicant and the loan type. Putting down 20% helps you avoid having to pay for private mortgage insurance (PMI).
• Proof of income: You should have at least two years of documentation proving stable income (e.g., tax returns, W-2s, pay stubs, bank statements).
• Loan amount: The amount of a conventional loan can’t exceed the maximum conforming loan limit, which is set each year by the FHFA.

» MORE: What credit score is needed to buy a house?

What’s the difference between conventional loans and government-backed loans?

Overall, government-backed loans are less risky for lenders than conventional mortgages because the government guarantees them. As a result, borrowers may have an easier time qualifying for government-backed loans. They tend to have lower down payment and DTI ratio requirements, and traditionally have lower credit score requirements than conventional loans.

Government-backed mortgages are designed for specific purposes, and they don’t fit every borrower. Let’s see how a conventional mortgage compares with different types of government-backed mortgages.

Pros and cons of conventional loans

In general, conventional mortgages have fewer restrictions than government-backed loans, even if some requirements are stricter for borrowers. Lenders have more flexibility with conventional loans because they set their own eligibility standards.

“If you have a robust credit score and can afford a solid down payment, a traditional mortgage offers more flexibility and potentially lower costs over time,” said Gagan Saini, director of acquisitions at JiT Home Buyers.

Consider these advantages and disadvantages of conventional mortgage loans before making your choice.

» MORE: How to buy a house

FAQ

Bottom line

A conventional mortgage is the most common type of mortgage in the industry and offers flexibility with loan amounts, down payments, term lengths and interest rates. If you have good credit, low debt and a healthy income, a conventional mortgage is often a good choice.