A conventional loan is a mortgage that is not insured or guaranteed by a government agency (such as FHA, VA, or USDA). Most conventional loans are conforming loans, meaning they meet the guidelines set by Fannie Mae and Freddie Mac, including loan limits, credit standards, and documentation requirements.
Conforming loan limits determine the maximum mortgage amount that can be purchased by Fannie Mae or Freddie Mac. Loans at or below these amounts are considered conforming conventional loans. Loans above these limits are typically jumbo loans with different underwriting requirements and pricing.
Effective January 1, 2026, the baseline conforming loan limits for conventional loans in most of the United States are:
| Property Type | Baseline Conforming Loan Limit (Most U.S. Areas) |
|---|---|
| 1-Unit Home | $832,750 |
| 2-Unit Property | $1,066,250 |
| 3-Unit Property | $1,288,800 |
| 4-Unit Property | $1,601,750 |
In designated high-cost areas (areas where local median home prices justify elevated limits), conforming loan limits are higher. The maximum ceiling for 2026 is:
| Property Type | High-Cost Area Loan Limit Ceiling |
|---|---|
| 1-Unit Home | $1,249,125 |
| 2-Unit Property | $1,599,375 |
| 3-Unit Property | $1,933,200 |
| 4-Unit Property | $2,402,625 |
These figures represent the maximum limits permitted under the statutory framework (150 percent of baseline for high-cost areas). Actual county limits for high-cost areas may fall below the ceiling based on local median home values.
In certain regions — particularly Alaska, Hawaii, Guam, and the U.S. Virgin Islands — baseline and high-cost limits are set at higher statutory levels than the contiguous U.S. baseline. For example, the baseline conforming limit for a one-unit property in these areas is $1,249,125.
While requirements vary by lender, conventional loans generally require:
Conventional loans are an excellent option for borrowers seeking flexibility, lower long-term costs, and competitive pricing. With cancellable PMI and broad eligibility across property types, they remain one of the most popular and cost-effective mortgage solutions available.
Conventional loans offer several advantages. First, they often have more flexible terms and lower interest rates than government-backed loans. Additionally, conventional loans also allow for higher loan amounts, making them suitable for financing higher-priced homes.
It is possible to obtain a conventional mortgage loan with a down payment as low as 3%. While conventional loans traditionally require a larger down payment, some borrowers may qualify to purchase a home with a 3%-5% down payment. Keep in mind that a lower down payment may result in additional costs, such as private mortgage insurance (PMI).
To qualify for a conventional loan, you generally need a good credit score (usually above 620), a stable employment history, and a manageable debt-to-income ratio. Other factors, such as your income, assets, and the property's appraisal value, will also be considered. Specific requirements may vary, so it's essential to consult with a mortgage professional to determine your eligibility.
Conventional loans can be an excellent choice for many homebuyers. They often offer competitive interest rates, term flexibility, and the ability to finance various property types. However, whether a conventional loan is the best option depends on your financial situation, credit history, and preferences. It's always a good idea to explore multiple loan options and consult a mortgage professional to determine the best fit for your needs.
The timing for refinancing an FHA loan into a conventional loan depends on several factors. In most cases, you can refinance an FHA loan into a conventional loan once you have built enough equity in your home. Typically, this means reaching an 80% loan-to-value (LTV) ratio. However, specific requirements may vary, so it's important to discuss your options with a mortgage professional who can guide you through the process.
There are several options available to help cover closing costs with your conventional loan:
It is possible to obtain a conventional loan if you owe taxes, but it depends on several factors. First, it's important to understand the difference between owing taxes and having a tax lien. Owing taxes means you owe money to the IRS and/or a state, while a tax lien occurs when your unpaid taxes result in collection actions. Having an IRS lien on your income or assets can significantly decrease your chances of being approved for a conventional mortgage.
Communicate openly with your mortgage professional to guide you through the loan application process and help you explore potential solutions or alternatives.
- Higher Loan Limits: Conventional loans generally offer higher loan limits compared to FHA loans. This can be beneficial if you are looking to finance a more expensive property or live in a high-cost area, as it allows you to borrow a larger amount.
- No Upfront Mortgage Insurance: Unlike FHA loans, Conventional loans do not require upfront mortgage insurance premiums. This means you can save on the upfront costs associated with the loan and potentially lower your overall loan amount.
- Flexible Mortgage Insurance Options: With a Conventional loan, once you reach a loan-to-value (LTV) ratio of 80% or less, you have the option to cancel private mortgage insurance (PMI) or request its removal. This can result in significant savings over time compared to FHA loans, which typically require mortgage insurance for the entire loan term.
- More Lenient Property Standards: Conventional loans generally have more flexibility when it comes to property condition and appraisal requirements. FHA loans often have stricter property standards, which could limit your options when purchasing a home that needs repairs or renovations.
It's important to note that both loan types have their own advantages and considerations, and the right choice depends on your specific financial situation and goals. Consulting with a mortgage professional can help you evaluate the options and determine the best fit for your needs.