In short
A conventional loan is a mortgage that follows Fannie Mae and Freddie Mac guidelines rather than being government-insured. It allows down payments from about 3%, works on primary residences, second homes and investment properties, and its private mortgage insurance can be cancelled once you build enough equity.
Reviewed by Mike Maiorano, NMLS #2033984 · Last updated September 8, 2026
What makes a conventional loan different from FHA?
Two things matter most. First, mortgage insurance: on a conventional loan, private mortgage insurance can be removed once you reach enough equity, while FHA mortgage insurance generally stays for the life of the loan if you put the minimum down. Second, flexibility: conventional financing works on second homes and investment properties, and it doesn't come with FHA's property condition requirements. FHA wins when credit is the constraint. Conventional usually wins when it isn't. I run both side by side so you can see the difference in your actual numbers rather than in theory.
Key takeaways
Conventional financing is the default for a reason: it's flexible, it works on primary homes, second homes and investment properties, and the mortgage insurance comes off once you've built enough equity. For borrowers with reasonably strong credit it's usually the loan to beat, and it's the one I price everything else against. As a broker, I can shop conventional pricing across multiple lenders rather than handing you one institution's version of it.
The Loan Most Borrowers End Up In
Conventional loans aren't backed by a government agency — they follow guidelines set by Fannie Mae and Freddie Mac. That structure is what makes them so adaptable. Primary residence, second home in Venice, rental property in Michigan: conventional financing covers all of it, which is a big part of why it's the most common loan in the country.
Down Payment Options
- About 3% down for qualified first-time buyers on a primary residence
- 5% down is widely available for repeat buyers
- 10–15% down on second homes, depending on the program
- 20% down eliminates private mortgage insurance entirely
More down isn't automatically the right answer. Sometimes keeping cash in reserve is worth more to you than shedding mortgage insurance. That's a tradeoff conversation, and it's one worth having before you wire anything.
Private Mortgage Insurance Is Temporary
This is the feature people underuse. With conventional financing, PMI can be cancelled once you've built enough equity in the home — through payments, through appreciation, or both. That's a real monthly savings you get back later. FHA financing with the minimum down payment generally doesn't work that way.
It's also why the "FHA is for first-time buyers, conventional is for everyone else" framing is wrong. Plenty of first-time buyers are better served by conventional. Which is why I check.
Fixed or Adjustable
Conventional loans come in fixed-rate and adjustable-rate versions across a range of terms. A shorter fixed term builds equity faster with a higher payment; a longer one keeps the payment lower. An adjustable-rate structure can make sense if you have a genuine reason to expect a shorter hold, but it needs to be a real plan, not a hope. I'll lay the structures out and tell you honestly which one your situation argues for.
Where Conventional Gets Tricky
Credit guidelines are firmer than FHA, and debt-to-income matters more. Self-employed income gets scrutinized. Condos have to be warrantable, which trips up more Florida buyers than you'd think — if the building doesn't qualify, there's a separate path for that, and I handle those too.
None of that is a dead end. It just means the file has to be structured correctly before it goes to underwriting, which is the part I actually enjoy.
Buying Between Two States
I'm based in Venice, Florida and lend throughout Sarasota County and the Gulf Coast, and across Southeast Michigan in Grosse Pointe, St. Clair Shores, Shelby Township, Birmingham, Northville and Ann Arbor, plus Petoskey and Harbor Springs up north. Conventional financing is the workhorse in both markets — for primary homes, Florida second homes, and Michigan rentals alike.
Let's Price It Out
Tell me the scenario and I'll show you what conventional looks like against the alternatives, with the whole payment spelled out.
All loan scenarios and figures on this page are illustrative examples only, are not an offer or commitment to lend, and do not reflect guaranteed terms. Program availability, eligibility requirements, and limits change and are subject to change. Contact me for current details specific to your situation.
Quick facts
- Who it's for
- Borrowers with solid credit and documented income
- Down payment
- From about 3% (first-time) / 5% repeat
- Mortgage insurance
- PMI required under 20% down — removable
- Occupancy
- Primary, second home or investment
- Condos
- Must be warrantable
- Structures
- Fixed-rate and adjustable-rate terms
Is this loan right for you?
Who it's for
- Borrowers with reasonably strong credit and documented income
- Buyers who want mortgage insurance they can eventually remove
- Second-home and investment-property buyers
- Repeat buyers with equity from a previous home
Who it may not fit
- Borrowers whose credit or debt-to-income is better served by FHA
- Buyers of non-warrantable condos, which need a different program
- Self-employed borrowers whose tax returns understate their real income
Pros and cons
Pros
- Private mortgage insurance is removable once you build enough equity
- Works on primary residences, second homes and investment properties
- No FHA property condition overlay
- Wide range of fixed and adjustable structures and terms
Trade-offs to weigh
- Firmer credit and debt-to-income guidelines than FHA
- Condos must be warrantable
- Self-employed income is scrutinized more closely
Frequently asked questions
When can I get rid of private mortgage insurance?
Once you've built enough equity in the home. That can come from paying down the balance, from appreciation, or both, and the specific thresholds depend on the program and how you get there. This is one of conventional financing's real advantages, and I'll map out the path for your file.
Is conventional better than FHA for a first-time buyer?
Sometimes, and it's worth checking rather than assuming. If your credit is solid, conventional often costs less over time because the mortgage insurance is removable. If credit is the constraint, FHA is usually the better door. I price both.
Can I use a conventional loan for a rental property?
Yes. Conventional financing covers investment properties, generally with a larger down payment than a primary residence. If the property's own income is the story, a DSCR loan may fit better — I'll compare them.
What if my condo isn't warrantable?
Conventional financing requires a warrantable condo, and plenty of Florida buildings aren't. That's not the end of the deal — non-warrantable condo financing exists and I close those regularly.
How much does my credit score need to be?
Conventional guidelines are firmer than FHA, and pricing improves as credit improves. Rather than quote a cutoff, let me look at your credit and tell you where you land and whether a small change would meaningfully help.
Related loan programs
You don't need 20% down and you don't need to figure this out alone. Let's start with what your payment would actually be.
If credit is the thing standing between you and a house, this is usually the door that opens.
No down payment, no monthly mortgage insurance, and a benefit you can use more than once.
Last updated September 8, 2026 · Reviewed by Mike Maiorano, NMLS #2033984. This page is educational and not a commitment to lend; program details change — ask for current figures.