Conventional Loans: The Complete Guide

Designed for low-to-moderate income borrowers. Allows 3% down payment, accepts income from non-borrower household members, and permits boarder income. Reduced mortgage insurance costs compared to standard PMI. Requires homebuyer education course.

• Min. 620 credit score
• Income ≤ 80% of area median income (AMI)
• Boarder & rental income eligible
• Reduced MI premiums
• Homebuyer education required

Allows first-time homebuyers to put down as little as 3% on a fixed-rate mortgage. At least one borrower must be a first-time homebuyer (no ownership interest in a home in the past 3 years). Homebuyer education required when all borrowers are first-time buyers.

• Min. 620 credit score
• At least one first-time homebuyer
• 30-year fixed rate only
• Primary residence only
• Homebuyer education (when all FTHBs)

Combines a home purchase (or refinance) with renovation financing in a single loan. Borrowers can finance up to 75% of the "as-completed" appraised value. Covers structural repairs, luxury upgrades, landscaping, and more — including ADU construction.

• Primary, secondary, or investment
• Up to 75% as-completed LTV
• Luxury & structural renovations OK
• ADU construction eligible
• Licensed contractor required

Finances energy-efficient improvements — solar panels, insulation, HVAC upgrades, storm windows — as part of a purchase or refinance. Loan amount can exceed the appraised value by up to 15% to cover energy improvements.

• Solar, HVAC, insulation eligible
• Loan can exceed appraised value by 15%
• HERS report may be required
• Primary or secondary residence
• Pairs with HomeReady®

The most common mortgage product. Offers predictable monthly payments for the life of the loan. Available in 10, 15, 20, and 30-year terms. Rates are typically lower than adjustable-rate mortgages over the long term for borrowers who plan to stay in the home.

• Predictable payment for life of loan
• Multiple term options
• Primary, secondary, investment
• PMI cancellable at 20% equity
• Widest lender availability

Offers a fixed rate for an initial period (5, 7, or 10 years), then adjusts annually based on a market index (typically SOFR). Initial rates are usually lower than fixed-rate loans. Best for borrowers who plan to sell or refinance before the adjustment period begins.

• Lower initial rate than fixed
• 5/1, 7/1, 10/1 ARM structures
• Rate caps limit adjustment risk
• Primary, secondary, investment
• Ideal for short-term ownership

Freddie Mac's flagship affordable lending program. Allows 3% down for low-to-moderate income borrowers. Accepts sweat equity as a down payment source. Rental income from an accessory unit can be used to qualify. Reduced MI compared to standard PMI.

• Min. 660 credit score (no prior homeownership)
• Income ≤ 80% AMI
• Sweat equity accepted
• Accessory unit rental income OK
• Homebuyer education required

Freddie Mac's 3%-down program with NO income limits — available to any first-time homebuyer regardless of income or geographic location. At least one borrower must be a first-time homebuyer. Homebuyer education required when all borrowers are first-time buyers.

• No income limits
• Min. 620 credit score
• At least one first-time homebuyer
• Primary residence only
• Fixed-rate mortgages only

Freddie Mac's renovation loan product. Finances purchase or refinance plus renovation costs in one loan. Unique feature: allows borrowers to do some work themselves (sweat equity). Covers disaster-related repairs, resilience improvements, and luxury upgrades.

• Primary, secondary, or investment
• Sweat equity allowed
• Disaster resilience improvements OK
• Up to 75% as-completed LTV
• Pairs with Home Possible®

Conventional financing for factory-built homes that meet HUD code and are titled as real property. Offers the same terms as site-built home loans — fixed and adjustable rates, standard LTV limits. Expands affordable homeownership to manufactured housing buyers.

• HUD-code manufactured homes
• Titled as real property
• Fixed and ARM options
• Primary residence
• Standard conventional terms

For properties in high-cost areas where the FHFA has set higher conforming loan limits. Allows borrowers in expensive markets (e.g., coastal cities) to access conventional financing above the standard limit without going to a jumbo loan.

• High-cost county loan limits
• Up to $1,209,750 (2025)
• Standard conventional guidelines
• Fixed and ARM options
• Primary, secondary, investment

Freddie Mac's low-income refinance program. Allows borrowers with income at or below 80% AMI to refinance into a lower rate with reduced fees. Waives the adverse market refinance fee. Requires a net tangible benefit (lower rate or payment).

• Income ≤ 80% AMI
• No adverse market fee
• Net tangible benefit required
• Primary residence only
• Freddie Mac-owned loan required

• No upfront mortgage insurance premium (unlike FHA's 1.75% UFMIP)
• PMI is cancellable once you reach 20% equity — FHA MIP often lasts the life of the loan
• Available for primary residences, second homes, and investment properties
• Wide variety of term options: 10, 15, 20, 25, and 30-year fixed; 5/1, 7/1, 10/1 ARMs
• Competitive interest rates for borrowers with strong credit (740+)
• No property condition requirements as strict as FHA/VA (no required repairs for minor issues)
• Higher loan limits than FHA in most markets
• Can be used for condos, multi-unit properties, and manufactured homes
• Faster closing times in many cases due to less government oversight
• Seller concessions allowed (up to 3–9% depending on LTV)

• Stricter credit requirements than FHA (FHA allows 580 with 3.5% down; 500 with 10% down)
• PMI required with less than 20% down — adds to monthly cost
• Higher rates for borrowers with lower credit scores compared to FHA
• Larger down payment typically needed for investment properties (15–25%)
• Loan limits cap financing — high-cost markets may require jumbo loans
• Self-employed borrowers face more scrutiny and documentation requirements
• Stricter DTI limits than some government programs in manual underwriting
• Condo financing requires the project to be "warrantable" — many condo associations don't qualify
• No streamline refinance option (unlike FHA Streamline or VA IRRRL)

• PMI costs vary widely — shop lenders and compare MI quotes, not just interest rates
• Rate-based pricing adjustments (LLPAs) can significantly increase costs for lower credit scores or higher LTVs
• ARM loans carry rate risk after the fixed period — understand your caps before choosing
• Renovation loans require careful contractor vetting and draw management
• Conforming loan limits change annually — verify current limits before assuming eligibility
• Gift funds have specific documentation requirements — improper sourcing can delay closing
• Investment property financing has stricter reserve requirements and higher rates
• Automated underwriting approval is not a guarantee — lender overlays may apply