Flexible, Widely Used,
and Often Misunderstood
You don't need 20% down — and conventional loans aren't just for buyers with perfect credit. Let's look at what they actually require.
What Is a Conventional Loan?
A mortgage that isn't backed by a government agency. Instead, it follows guidelines set by Fannie Mae or Freddie Mac. Conventional loans are the most common type of home loan and offer a lot of flexibility across different financial situations.
Is This Loan Right for You?
✔ Great fit if…
- Your credit score is *680+
- You have 3–20%+ saved for a down payment
- You want mortgage insurance that eventually goes away
- You're buying a primary home, second home, or investment property
✗ May not be the best fit if…
- Your credit score is below 640
- You have minimal savings for a down payment
- You're a veteran (VA loan may offer better terms)
- You're buying in a rural area (USDA may offer better terms)
The Numbers at a Glance
| Minimum down payment | 3% for eligible buyers Source: Fannie Mae |
| Credit score minimum | No official minimum* — lender overlays typically start at 620 (better rates at 700+) Source: Fannie Mae (updated late 2025) |
| PMI | Required under 20% down — automatically drops at 20% equity Source: Consumer Financial Protection Bureau |
| 2026 conforming loan limit | $832,750 for most Colorado counties (single-family home) Source: FHFA.gov |
| Property types | Primary home, second home, or investment property |
* Fannie Mae Update — November 2025
Fannie Mae removed its minimum credit score requirement for conventional loans in November 2025. Instead of a hard cutoff, they now look at the whole financial picture — income stability, assets, payment history, and more. This means buyers who previously thought they didn't qualify may now have options. Individual lenders may still set their own minimum score requirements (called "overlays"), so the number you hear can vary — but it's worth having the conversation even if you're not sure your score is high enough.
Conventional vs. FHA — Quick Comparison
| Conventional | FHA | |
|---|---|---|
| Min. down payment | 3% | 3.5% |
| Min. credit score | *No official minimum (lenders may require 620+) | 580 |
| Mortgage insurance | Drops at 20% equity | Life of loan (usually) |
| Loan limit (most CO counties) | $832,750 | $541,287 |
| Best for | Stronger credit / more savings | Lower credit / smaller down payment |
Loan limits sourced from FHFA.gov and HUD.gov (2026). Learn more about FHA loans →
What People Get Wrong About Conventional Loans
You can put as little as 3% down. The 20% figure is simply the threshold where PMI goes away — it was never a hard requirement to get the loan.
They work across a wide range of incomes and financial situations. Many first-time buyers use conventional loans, especially if their credit score is strong enough to make it the better deal over FHA.
Unlike FHA mortgage insurance, conventional PMI automatically drops once you reach 20% equity in your home — saving you money over the long run.