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Loan Types

Conventional Loan Requirements 2026: Credit, Down Payment, DTI and Loan Limits

The conventional loan is the plain black coffee of mortgages: no government backing, no fancy add-ons and the most popular order on the menu. Here is what it takes to qualify in 2026.

By Keys & Coffee Editorial Team · Updated · 6 min read

White house with blue shutters and a front porch
Quick answers

  • What it is: a mortgage not insured or guaranteed by a government agency. Most follow Fannie Mae and Freddie Mac rules.
  • Down payment: as little as 3% for eligible first-time buyers and certain programs. Under 20% down usually means private mortgage insurance (PMI).
  • Credit: Fannie Mae and Freddie Mac’s automated systems no longer apply a hard 620 floor, but lenders can still set their own minimums and better scores get better pricing.
  • Debt-to-income: up to 50% with Fannie Mae’s automated approval; lower limits for manually underwritten loans.
  • 2026 loan limit: $832,750 for a one-unit home in most of the U.S., up to $1,249,125 in high-cost areas.

If mortgages were a coffee menu, the conventional loan would be the house drip. It is not flashy, but it is what most people order. It works for a wide range of buyers and properties, and the mortgage insurance can eventually go away.

Let’s go through the requirements in plain English, with 2026 numbers.

What makes a loan “conventional”?

A conventional loan is any mortgage that is not backed by FHA, VA or USDA. Most conventional loans are “conforming,” which means they follow the rules of Fannie Mae and Freddie Mac. Those two companies buy loans from lenders, which keeps money flowing so lenders can make more loans.

Loans above the conforming limit are called jumbo loans and play by different, usually stricter, rules.

Conventional loan requirements at a glance

Requirement Typical conforming guideline
Minimum down payment 3% (eligible first-time buyers and some programs); 5% is common otherwise
Credit score No hard 620 floor in Fannie Mae’s Desktop Underwriter since November 2025; lenders may set their own
Debt-to-income (DTI) Up to 50% with automated approval; often 36% to 45% for manual underwriting
Mortgage insurance PMI required when you put down less than 20%
2026 loan limit (1 unit) $832,750 baseline; up to $1,249,125 in high-cost areas
Property types Primary homes, second homes and investment properties

Credit score: what changed

For years, 620 was treated as the magic number for conventional loans. That changed. In November 2025, Fannie Mae updated its Selling Guide so that Desktop Underwriter, its automated approval system, no longer rejects files only because a score is under 620. Freddie Mac’s system had already moved away from a hard cutoff.

Before you celebrate, two caveats:

  • Lenders can still have their own minimums. Many will want to see a score they are comfortable with.
  • Pricing still follows your score. A lower score usually means a higher rate or extra fees, plus pricier PMI.

Also new: under FHFA policy, lenders delivering loans to Fannie Mae and Freddie Mac can now use either Classic FICO or VantageScore 4.0, as long as they use the same model for all borrowers on the loan.

Myth buster“You need 20% down for a conventional loan.” Nope. Twenty percent is the number that lets you skip PMI, not the minimum. Eligible first-time buyers can put down as little as 3%.

Down payment options

Here is how the low-down-payment conventional options work:

  • 3% down for first-time buyers. Fannie Mae and Freddie Mac both allow 97% loan-to-value loans when at least one borrower is a first-time buyer.
  • HomeReady (Fannie Mae) and Home Possible (Freddie Mac). These allow 3% down for buyers with income at or below 80% of the area median, and you do not have to be a first-time buyer.
  • 5% to 19% down. Standard conventional loans with PMI.
  • 20% or more. No PMI.

Gift money from family is generally allowed for a primary home, with a signed gift letter. Wondering what price you can really handle? Try our home affordability calculator, or read how much house you can afford on $100K.

Debt-to-income ratio

Your debt-to-income ratio (DTI) is your monthly debt payments, including the new mortgage, divided by your gross monthly income. Fannie Mae allows a DTI up to 50% when Desktop Underwriter approves the loan. For manually underwritten loans, the standard limit is 36%, which can stretch to 45% with strong credit and savings.

A lower DTI gives you more breathing room in real life, too, not just on paper.

PMI: the part that eventually goes away

Put down less than 20% and you will usually pay private mortgage insurance. The good news is that conventional PMI does not last forever. Under the federal Homeowners Protection Act:

  • You can ask to cancel PMI once your balance reaches 80% of the home’s original value, if you are current on payments and meet the servicer’s requirements.
  • PMI must end automatically once your balance is scheduled to hit 78% of the original value, as long as you are current.
Example

You buy a $350,000 home with 5% down ($17,500), so your loan is $332,500. At a hypothetical 6.5% for 30 years, principal and interest are about $2,102 a month, plus PMI, taxes and insurance.

  • 80% of the original value is $280,000. On the regular payment schedule, you reach it after about 124 payments (a little over 10 years), when you can request cancellation.
  • 78% is $273,000, reached after about 135 payments, when PMI should drop off automatically.

Extra principal payments get you there sooner. Rates are illustrative only.

See how extra payments speed things up with our extra payment calculator, and read the full story in what PMI is and how to get rid of it.

Fun factThe conforming loan limit is set each year by the Federal Housing Finance Agency based on home price changes. For 2026 the baseline rose to $832,750, so a “regular” mortgage can now be bigger than many people expect.

Other things lenders check

  • Steady income: usually a two-year history, documented with pay stubs, W-2s or tax returns.
  • Cash reserves: some loans require savings left over after closing, often measured in months of payments.
  • Appraisal: the home has to be worth what you are paying, or close to it.
  • Waiting periods: after a bankruptcy or foreclosure, conventional loans have waiting periods that are generally longer than FHA’s.

Conventional vs FHA in one table

Conventional FHA
Minimum down 3% (eligible buyers) 3.5% with a 580+ score
Mortgage insurance PMI, can be canceled Upfront and annual premiums, often for the life of the loan
Credit flexibility Better pricing for higher scores Often more forgiving for lower scores
Property use Primary, second home or investment Primary residence only

For the full FHA picture, see our FHA loan requirements guide.

FAQ

What credit score do I need for a conventional loan in 2026?

There is no longer a hard 620 cutoff in Fannie Mae’s automated system, but lenders can set their own minimums. Higher scores generally mean better rates and cheaper PMI.

Can I get a conventional loan with 3% down?

Yes, if at least one borrower is a first-time buyer or you qualify for HomeReady or Home Possible, which have income limits.

What is the 2026 conforming loan limit?

$832,750 for a one-unit home in most areas, and up to $1,249,125 in designated high-cost areas.

Can I use a conventional loan for a rental property?

Yes. Conventional loans can finance investment properties, usually with a bigger down payment and higher pricing.

When does PMI go away?

You can request cancellation at 80% of the original value, and it ends automatically at 78% on schedule, as long as you are current on payments.

Keys & Coffee is an independent education site and is not a lender. Examples are for illustration only. Sources: Federal Housing Finance Agency (2026 conforming loan limits and credit score policy), Fannie Mae Selling Guide, Freddie Mac, Consumer Financial Protection Bureau (Homeowners Protection Act and PMI), U.S. Department of Housing and Urban Development (FHA).

Keys & Coffee Editorial Team

We turn lender-speak into plain English. We check our numbers against official sources like the CFPB, HUD, Fannie Mae and Freddie Mac, and we update guides when the rules change.

Keys & Coffee is an independent education site. We are not a lender or mortgage broker, we do not take loan applications or payments, and nothing here is financial advice. This site is not affiliated with Axia Home Loans, Axia Financial, LLC, or Planet Home Lending. Rates and rules change often — always confirm details with a licensed loan officer and check any lender on the NMLS Consumer Access site.

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