What Is a Conventional Loan?
A conventional loan is a mortgage that is not backed or insured by a federal government agency like the FHA, VA, or USDA. Instead, conventional loans follow guidelines set by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) — the two government-sponsored enterprises that purchase mortgages from lenders.
Because conventional loans don't have government backing, lenders take on more risk — which is why they typically require stronger credit scores and financial profiles. However, for borrowers who qualify, conventional loans often offer lower long-term costs than FHA loans, especially for those who can put 20% or more down and avoid private mortgage insurance (PMI).
Conventional Loan Requirements in Florida
Credit Score
- Minimum: 620 (most programs) to 640 (some lenders)
- 620–679: Higher rates, may require additional reserves
- 680–739: Good rates, standard requirements
- 740+: Best available rates, easiest qualification
Down Payment Options
| Down Payment | PMI Required? | Notes |
|---|---|---|
| 3% (HomeReady/HomePossible) | Yes | Income limits apply; first-time buyer programs |
| 5% | Yes | Standard minimum for most conventional loans |
| 10% | Yes (lower rate) | Reduced PMI cost |
| 20% | No | No PMI — significant monthly savings |
| 20%+ | No | Best rates, maximum flexibility |
Conventional vs. FHA Loans: Which Is Right for You?
| Factor | Conventional | FHA |
|---|---|---|
| Minimum Credit Score | 620 | 580 (500 with 10% down) |
| Minimum Down Payment | 3% (programs) / 5% (standard) | 3.5% (with 580+ score) |
| Mortgage Insurance | PMI (removable at 20% equity) | MIP (often for life of loan) |
| Loan Limits (Pinellas/Hillsborough) | $806,500 (conforming) | $524,225 |
| Investment Properties | Yes (with higher requirements) | No (primary only) |
| Property Condition | Standard appraisal | Stricter FHA appraisal standards |
| Seller Concessions | 3–6% (based on down payment) | Up to 6% |
| Best For | Strong credit, larger down payment | Lower credit, smaller down payment |
When Does Conventional Make More Sense Than FHA?
- You have a 740+ credit score — conventional rates beat FHA
- You can put 20%+ down — avoid mortgage insurance entirely
- You're buying a condo or non-owner occupied property
- The home is above the FHA loan limit for your county
Private Mortgage Insurance (PMI)
PMI is required on conventional loans when your down payment is less than 20%. Unlike FHA's MIP, conventional PMI has some significant advantages:
- Removable: Once you reach 20% equity (via payments or appreciation), you can request PMI removal
- Automatic removal: Lenders must automatically cancel PMI when you reach 22% equity
- Cost varies: PMI typically ranges from 0.2%–2% of the loan amount annually depending on credit score and LTV
- Lender-paid PMI: Some lenders offer lender-paid PMI in exchange for a slightly higher rate
Conventional Loan Types
Fixed-Rate Mortgages
- 30-Year Fixed: Most popular — lowest monthly payment, rate locked for life of loan
- 20-Year Fixed: Build equity faster, lower total interest, slightly higher payment
- 15-Year Fixed: Significantly lower rate, highest payment, build equity twice as fast
Adjustable-Rate Mortgages (ARMs)
- 5/1 ARM, 7/1 ARM, 10/1 ARM: Fixed rate for initial period, then adjusts annually
- Best for buyers who plan to sell or refinance before the adjustment period
- Lower initial rates than fixed — can save significantly in the short term
ARM Disclosure (Reg Z § 1026.24): Adjustable-rate mortgage interest rates are fixed only for the initial period stated. After the initial fixed-rate period, the interest rate may increase after consummation of the loan. Rate adjustments are tied to a market index and subject to applicable caps. Ask for full ARM disclosure details before proceeding.
Conventional Loan Limits
Select your state and county to see the 2026 conforming loan limits for your area.
Down Payment & Closing Costs
Down Payment Flexibility
- Gift Funds: Conventional loans allow 100% of down payment as gift from family members
- Down Payment Assistance: Some DPA programs work with conventional loans
- Retirement Accounts: IRA/401k funds can be used (subject to program rules)
Seller Concessions
- 3% seller concessions allowed with < 10% down
- 6% seller concessions allowed with 10–25% down
- 9% seller concessions allowed with > 25% down
The Conventional Loan Process
- Pre-Qualification & Credit Review
I pull your credit, review income and assets, and identify the best conventional program. - Pre-Approval Letter
Submit documents; receive pre-approval in 24–48 hours. Ready to make offers. - Submit Loan Application
Once under contract, formal loan application is submitted with all documentation. - Appraisal & Processing
Conventional appraisal ordered; processor compiles file for underwriter review. - Underwriting Decision
Clear to Close issued once all conditions are satisfied. - Closing
Sign final documents, funds are wired, you receive the keys to your new home.
Why Work With a Mortgage Broker for Conventional Loans?
Conventional loan pricing varies significantly between lenders. As a broker, I shop your loan across 25+ wholesale lenders to find the most competitive rate and terms — something a single bank simply cannot offer. Even a 0.25% difference in rate can save thousands over the life of your loan.