2020 Conventional Loan Guide

Conventional Loan Requirements

  • 640+ credit score
  • 5% – 20% down payment
  • 3% down with 97 Conventional loan
  • Pay stubs, tax returns, and W2’s
  • Full two years employment history
  • Debt-to-income ratio must not exceed 43%
  • Reserve funds of at least 2-3 months of mortgage payments

Down Payment Guidelines

  • Down payment between 5%-20% of the sales price
  • PMI required if the down payment is less than 20%
  • Down payment can be a gift from a friend or family member

Pros and Cons of Conventional Loans



  • Credit score requirement is higher than FHA (minimum 620-640)
  • Higher down payment requirement  (5%-20%)
  • Qualifying guidelines are more strict
  • Low-income borrowers may not qualify

FHA vs conventional loans comparison chart

Non-Conforming Loans

Conforming loans are mortgage loans that are underwritten to standards issued by Government-backed entities Fannie Mae and Freddie Mac and make up more than half of all mortgages issued today.

Loans that do not meet these requirements are non-conforming, including jumbo loans, portfolio loans, and investor loans.

Conventional Loan Limits

  •  Low-cost areas: $410,400
  • High-cost areas: $765,600

Conventional Loan Alternatives

If you find you’re not eligible for a conventional loan there are alternatives that are easier to qualify for. Government-backed loans are issued by private lenders and guaranteed by the Federal Government that have low down payment and credit requirements.

  • FHA Loans – An FHA mortgage is popular for its low 580 credit score requirements and 3.5% down payment.
  • VA LoansVA loans are for Veterans; they come with no downpayment or mortgage insurance.
  • USDA Loans – The Department of US Agriculture created the USDA guaranteed loan program for low-to-median income homebuyers in rural areas of the country.

A conventional loan may be a good fit for you if

  • Minimum 640 FICO score
  • Have a 20% down payment
  • Want to avoid PMI by putting at least 20% down
  • Have a high income (low debt-to-income ratio)
  • Need a loan amount that is above the FHA loan limit

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