In short
A conventional loan is a mortgage that isn't insured by a government program like FHA, VA, or USDA and follows Fannie Mae and Freddie Mac guidelines. It fits buyers with reasonably strong credit who want flexible structures and mortgage insurance that can eventually be removed.
Reviewed by John Schwarzkopf, NMLS #1115528 · Last updated July 24, 2026
What is a conventional loan, and is it right for me?
A conventional loan is a mortgage that isn't backed by a government agency like FHA, VA, or USDA — it follows guidelines set by Fannie Mae and Freddie Mac. It tends to fit buyers with good credit, stable income, and manageable debt. Two things make it attractive: qualified buyers can put down as little as about 3%, and the private mortgage insurance (PMI) that comes with a smaller down payment can be removed once you reach roughly 20% equity — something FHA generally doesn't allow. Whether it beats the alternatives for you is exactly the comparison our team runs before you commit to anything.
Key takeaways
For buyers with solid credit, a conventional loan is usually the first program worth pricing — but "a conventional loan" isn't one thing. Put 3% down or 15% down, buy points or take lender credits, choose a 30-year or a 15-year, and you get very different loans with very different lifetime costs. Pick Your Rate was built on showing you those versions side by side. We shop our lending partners, lay out the structures in plain English, and you pick the one that serves your plan.
What Is a Conventional Loan?
A conventional loan is a mortgage that isn't insured or guaranteed by a government agency. It conforms to standards set by Fannie Mae and Freddie Mac, the two entities behind most of the U.S. mortgage market, which means the lender is looking primarily at your credit profile, income stability, and down payment.
For Connecticut buyers with solid credit, conventional financing is usually the benchmark every other option gets measured against. As an independent brokerage, Pick Your Rate prices it across a wide network of lending partners rather than a single bank's menu — and then shows you the versions next to each other.
The Down Payment Is a Dial, Not a Rule
The most persistent myth in mortgages is that conventional means 20% down. It doesn't. Qualified buyers — especially first-timers — can put down as little as about 3%, and 5%, 10%, and 15% tiers are all common. Each tier changes your monthly payment and your mortgage insurance differently, and the "right" setting depends on your savings, your other goals, and how tight you want your monthly budget to run.
This is where our approach earns its keep: instead of telling you what to put down, we show you what each choice does to the numbers, and you set the dial.
PMI That Actually Goes Away
Put down less than 20% on a conventional loan and you'll carry private mortgage insurance — but unlike FHA's version, conventional PMI is temporary. Once you reach roughly 20% equity through payments, appreciation, or both, you can request removal, and it terminates automatically around 22% equity. In a state like Connecticut, where many owners build equity steadily in established towns, that removability is a genuine long-term advantage, and we'll model exactly when it could kick in for you.
Conventional vs. FHA: The Honest Comparison
| Feature | Conventional Loan | FHA Loan |
|---|---|---|
| Backing | Fannie Mae / Freddie Mac guidelines | Government-insured (FHA) |
| Minimum down payment | As little as about 3% | Around 3.5% |
| Credit profile | Rewards stronger credit | More flexible on thinner or bruised credit |
| Mortgage insurance | PMI — removable near 20% equity | Often stays for the life of the loan |
| Property condition | More flexible appraisal standards | Stricter condition requirements |
| Occupancy | Primary, second home, or investment | Primary residence only |
Neither program is "better" in the abstract. FHA's flexibility is real, and so is conventional's removable insurance. We run both against your actual file and let the numbers argue it out in front of you.
Conforming Limits Are a County Question
Conventional loans within the Federal Housing Finance Agency's limits are called conforming loans, and those limits are reset every year, county by county. In parts of Connecticut — Fairfield County especially — purchase prices push past the conforming line more often than buyers expect, which moves the conversation into jumbo territory. We'll confirm the current limit for your county and price point up front, so a limit never surprises you mid-deal.
How Pick Your Rate Handles It
We start with your goal — the house, the town, the monthly number you want to live with — then price conventional structures across our lending partners and put the serious contenders side by side: down payment, points versus credits, term, insurance, cash to close. You'll see how each version behaves today and over the years you plan to own. Then you pick. That's not a slogan; it's the process.
All figures, down payment percentages, equity thresholds, and loan limits referenced above are illustrative examples for general education only. They are not an offer to lend, a pricing quote, or a guarantee of terms. Actual programs, eligibility, mortgage insurance, and conforming limits vary by borrower, property, county, and current guidelines. Contact our team for current details specific to your situation.
Quick facts
- Loan type
- Not government-insured (conforming)
- Typical minimum credit score
- Generally around 620+
- Typical minimum down payment
- As low as 3% for eligible buyers
- Mortgage insurance
- PMI required under 20% down; removable at 20% equity
- Occupancy
- Primary, second home, or investment
- Loan limits
- Conforming limits change annually — ask for current figures
Is this loan right for you?
Who it's for
- Buyers whose credit sits roughly at 620 or better
- People who want mortgage insurance that can be removed at roughly 20% equity
- Move-up buyers, second-home shoppers, and plenty of investors
- Buyers who want to choose their structure — down payment tier, term, points versus credits
Who it may not fit
- Buyers with bruised or thin credit — FHA usually treats them better
- Borrowers carrying debt ratios that need more forgiving underwriting
Pros and cons
Pros
- Eligible buyers can start with about 3% down
- PMI comes off at roughly 20% equity, unlike FHA insurance
- The stronger your credit, the better the loan tends to be structured for you
- One program covers primary homes, second homes, and investment properties
Trade-offs to weigh
- Wants stronger credit than FHA does
- Below 20% down you carry PMI until your equity clears the threshold
Frequently asked questions
Do I really only need 3% down for a conventional loan?
For many qualified buyers, yes — especially first-time buyers. Below 20% down you'll carry PMI until you build roughly 20% equity, so the real question is which down payment tier gives you the monthly payment and cash cushion you want. We'll show you several tiers side by side so the trade-off is visible instead of theoretical.
How is a conventional loan different from an FHA loan?
Conventional follows Fannie Mae and Freddie Mac guidelines and rewards stronger credit; FHA is government-insured and more forgiving on credit. The biggest practical difference is mortgage insurance: conventional PMI can be removed around 20% equity, while FHA's usually stays for the life of the loan. We run both against your file so you can see which one actually costs less for you over time.
When does PMI come off a conventional loan?
You can typically request removal once you reach roughly 20% equity through payments or appreciation, and it terminates automatically around 22%. We'll show you a realistic timeline for your scenario — in many established Connecticut towns, steady equity growth gets owners there sooner than they assume.
What will my rate be on a conventional loan?
There's no honest one-size answer to that — and despite our name, we won't pretend otherwise. Your rate depends on your situation and the day's market — reach out and we'll price it for real. What we will do is show you how rate, points, and lender credits interact, so the version you pick is priced for your file, not a teaser.
What are conforming loan limits?
They're the maximum loan amounts Fannie Mae and Freddie Mac will purchase, set annually by county. Cross the limit for your county and you're in jumbo territory with different guidelines — a live issue in Connecticut's higher-priced markets. We'll confirm the current number for the county you're buying in.
Can I use a conventional loan for an investment property or second home?
Yes — conventional financing is often the primary route for second homes and investment properties, since government-backed programs are generally limited to primary residences. Expect higher down payment and qualification requirements, and note that Connecticut's two- to four-family homes can be financed conventionally as owner-occupied if you live in one unit. We'll walk you through the specifics.
Related loan programs
The Pick Your Rate team walks first-time buyers across Connecticut through every option side by side — low down payments, CHFA assistance, and the numbers behind each choice — so your first mortgage is a decision you understand, not one you were handed.
About 3.5% down and credit guidelines built for real life. The Pick Your Rate team explains exactly what FHA costs and when it's the right pick — before you commit to anything.
Zero down and no monthly mortgage insurance for eligible veterans, service members, and surviving spouses. Pick Your Rate helps Connecticut military families use the benefit with full understanding — COE, funding fee, entitlement, all of it.
Last updated July 24, 2026 · Reviewed by John Schwarzkopf, NMLS #1115528. This page is educational and not a commitment to lend; program details change — ask for current figures.