Conventional Loans: Flexible Options for Qualified Borrowers

Conventional loans are not government-backed and typically offer competitive rates and terms for borrowers with strong credit and stable income. Down payment options range from 3% to 20% or more.

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What Is a Conventional Loan?

A conventional loan is any mortgage that isn’t backed by a government agency like the FHA, VA, or USDA. Conventional loans conform to guidelines set by Fannie Mae and Freddie Mac (conforming loans) or are originated outside those standards (non-conforming, including jumbo loans).

Because the lender takes on more risk without government backing, conventional loans typically require stronger credit and income profiles than FHA loans, but they can offer advantages like lower total mortgage insurance costs and more property flexibility.

Who Conventional Loans May Fit

Conventional loans may be worth comparing if you:

  • Have a credit score of 620 or higher (740+ for the most competitive terms)
  • Have stable, documentable income
  • Have 3% to 20% or more available for a down payment
  • Are purchasing a second home or investment property (FHA and VA don’t allow this)
  • Want to cancel PMI once you reach 20% equity

Down Payment Options

Conventional loans offer a range of down payment options:

  • 3% down: Available through programs like Fannie Mae HomeReady and Freddie Mac Home Possible for eligible borrowers
  • 5% to 19.99% down: PMI required; higher down payment typically reduces PMI cost
  • 20% or more: No PMI required

Private Mortgage Insurance (PMI)

Unlike FHA’s MIP, conventional PMI is cancellable. Once you reach 20% equity in your home (either through payments or appreciation), you can request PMI removal. It automatically terminates at 22% equity (when your balance reaches 78% of the original home value) based on the original amortization schedule, per the federal Homeowners Protection Act.

Loan Limits

Conforming conventional loans must stay within loan limits set by the Federal Housing Finance Agency (FHFA). For 2026, the standard conforming limit is $832,750 in most counties. Higher limits (up to $1,249,125) apply in designated high-cost areas.

Benefits

  • No upfront mortgage insurance (unlike FHA)
  • PMI is cancellable once you reach 20% equity
  • Available for primary residences, second homes, and investment properties
  • Fewer property condition restrictions than FHA or VA
  • Competitive rates for borrowers with strong credit

Conventional Loans in Tampa, FL

For 2026, the conforming loan limit for Hillsborough County is $832,750 for a single-family home. Most Tampa neighborhoods fall well within that ceiling, making conventional the default choice for buyers across Brandon, Carrollwood, Seminole Heights, and similar markets. South Tampa neighborhoods like Palma Ceia and Bayshore Beautiful often exceed the conforming limit, requiring jumbo financing. See the Tampa conventional and jumbo loan guide for current limits, neighborhood breakdowns, and a side-by-side program comparison.

Limitations

  • Higher credit score requirements than FHA
  • Less flexibility for borrowers with recent credit events
  • PMI required with less than 20% down
  • Loan amounts capped at conforming limits (above requires jumbo financing)

Frequently Asked Questions

What credit score do I need for a conventional loan?

Most conventional loans require a minimum credit score of 620, though some programs require 640 or higher. For the most competitive rates and terms, 740 or above is generally favorable. Talk with a loan officer about your credit profile and which conventional options may apply.

What is the minimum down payment on a conventional loan?

Some conventional programs, including Fannie Mae HomeReady and Freddie Mac Home Possible, allow as little as 3% down for eligible borrowers. Standard conventional loans typically start at 5% down. Putting 20% or more down eliminates the requirement for private mortgage insurance.

How does conventional PMI compare to FHA mortgage insurance?

Conventional PMI is cancellable once you reach 20% equity in your home. FHA mortgage insurance premium (MIP) with less than 10% down is required for the life of the loan. For borrowers who qualify for both, a conventional loan may cost less over time once equity builds. The better choice depends on your credit score, down payment, and how long you plan to stay in the home.

When can I cancel PMI on a conventional loan?

You can request PMI cancellation once your loan-to-value ratio reaches 80% (20% equity) based on the original purchase price or a new appraisal in some cases. PMI must be automatically terminated when your balance reaches 78% of the original home value based on your amortization schedule, per the Homeowners Protection Act.

Can I use a conventional loan for an investment property or second home?

Yes. Conventional loans can be used for second homes and investment properties, which FHA and VA loans do not allow. Down payment requirements for investment properties are typically 15-25%, and the interest rate may be higher than for a primary residence. Talk with a loan officer about investment property financing.

Compare Your Mortgage Options

Subject to credit, income, property, program, and lender guidelines. Talk with a loan officer about your specific scenario.

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