Conventional Mortgage Calculator

    Estimate your monthly payment for a conventional loan. Includes principal, interest, taxes, insurance, and PMI for down payments under 20%.

    Loan Details

    Enter the total price of the home
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    Additional Costs

    Monthly Payment Breakdown

    Principal

    $217

    11.3%

    Interest

    $1,300

    67.8%

    Property Tax

    $300

    15.6%

    Insurance

    $100

    5.2%

    The Complete Guide to Conventional Mortgages in 2025

    A conventional mortgage is a home loan that is not insured or guaranteed by the federal government. Unlike FHA, VA, or USDA loans, conventional mortgages are backed by private lenders and typically follow guidelines set by Fannie Mae and Freddie Mac. They are the most common type of mortgage, accounting for about 70% of all home loans.

    Conventional Loan Eligibility Requirements

    According to Consumer Financial Protection Bureau guidelines, conventional loans have stricter requirements than government-backed options:

    Credit Score

    Minimum 620 for most lenders. Scores of 740+ qualify for the best rates. Each 20-point drop typically increases rates by 0.125-0.25%.

    Down Payment

    As low as 3% for first-time buyers (HomeReady/Home Possible). 5-20% is typical. 20%+ eliminates PMI requirement.

    Debt-to-Income Ratio (DTI)

    Maximum 43-45% back-end DTI for most borrowers. Up to 50% may be allowed with compensating factors like high credit or cash reserves.

    Employment & Income

    Two years of stable employment history preferred. Income must be documented with W-2s, tax returns, and pay stubs.

    Property Types Allowed

    Primary residence, second homes, and investment properties. More flexibility than government loans.

    Cash Reserves

    Typically 2 months of mortgage payments in reserve. Investment properties may require 6 months.

    Conventional Loan Pros and Cons

    ✓ Advantages of Conventional Loans

    • ✓No upfront mortgage insurance premium
    • ✓PMI can be removed at 20% equity (unlike FHA MIP)
    • ✓Competitive rates for borrowers with good credit
    • ✓Flexible property types: primary, second home, investment
    • ✓Higher loan limits than FHA ($766,550 in most areas)
    • ✓Less paperwork and faster closing than government loans
    • ✓No occupancy requirements for investment properties

    ✗ Disadvantages of Conventional Loans

    • ✗Higher credit score requirements than FHA (620 vs 500)
    • ✗PMI required for down payments under 20%
    • ✗Stricter DTI requirements than government loans
    • ✗Less forgiving of past credit issues
    • ✗Higher rates for lower credit scores
    • ✗Gift funds may have restrictions

    Conforming vs. Non-Conforming Loans

    Conventional loans fall into two categories based on loan limits set by the Federal Housing Finance Agency (FHFA):

    Conforming Loans

    Meet Fannie Mae/Freddie Mac guidelines and fall within loan limits:

    • • $832,750 for most U.S. counties (2026)
    • • Up to $1,249,125 in high-cost areas
    • • Generally offer best rates

    Non-Conforming (Jumbo) Loans

    Exceed conforming limits or don't meet standard criteria:

    Understanding Private Mortgage Insurance (PMI)

    If your down payment is less than 20%, you'll pay PMI to protect the lender against default. PMI costs typically range from 0.3% to 1.5% of the loan amount annually, or $50-$250/month per $100,000 borrowed. Unlike FHA mortgage insurance, PMI can be removed once you reach 20% equity:

    • Request removal at 20% equity: Based on original purchase price or current appraised value
    • Automatic cancellation at 22% equity: Lenders must remove PMI when you hit this threshold
    • Refinance to remove PMI: If your home has appreciated significantly, consider refinancing

    Who Is a Conventional Loan Best For?

    Conventional loans are ideal for borrowers who have:

    • Good to excellent credit (680+) to qualify for competitive rates
    • Stable income and employment with documented history
    • 10-20% down payment to minimize or eliminate PMI
    • Plans to buy a second home or investment property
    • Need for higher loan amounts above FHA limits

    If your credit score is below 620 or you have limited savings, consider an FHA loan. Veterans should explore VA loans for 0% down with no PMI.

    How to Interpret Your Calculator Results

    Making Sense of Your Conventional Loan Estimate

    • Evaluate PMI impact: If PMI adds $150+/month, calculate how long until you reach 20% equity and compare total costs to an FHA loan.
    • Check conforming limits: If your loan exceeds $766,550, you'll need a jumbo loan with stricter requirements.
    • Compare loan terms: A 15-year loan has higher payments but saves thousands in interest. Use our mortgage calculator to compare.
    • Verify affordability: Keep your housing payment under 28% of gross income. Use our affordability calculator to check.

    Conventional vs. Government-Backed Loans

    FeatureConventionalFHAVA
    Min. Credit Score620+580+No VA minimum
    Min. Down Payment3%3.5%0%
    Mortgage InsurancePMI (removable)MIP (lifetime)Funding fee
    Loan Limits (2024)$766,550*$498,257*No limit
    Property TypesAll typesPrimary onlyPrimary only

    *Higher limits in high-cost areas

    Frequently Asked Questions About Conventional Loans

    Can I get a conventional loan with a bankruptcy or foreclosure?

    Yes, but waiting periods apply. After Chapter 7 bankruptcy: 4 years. After foreclosure: 7 years (or 3 years with extenuating circumstances). After Chapter 13 bankruptcy: 2 years from discharge.

    What's the difference between HomeReady and Home Possible?

    Both are 3% down payment programs. HomeReady (Fannie Mae) allows income from non-borrower household members. Home Possible (Freddie Mac) has similar features. Both have income limits in most areas.

    Should I choose a 15-year or 30-year conventional loan?

    15-year loans have lower rates and save significantly on interest but require higher monthly payments. 30-year loans offer lower payments and more flexibility. Consider making extra payments on a 30-year loan for the best of both worlds.

    Can I use gift funds for my conventional loan down payment?

    Yes, gift funds are allowed from family members, employers, or other approved sources. For down payments under 20%, you may need to contribute some of your own funds depending on the program.

    Official Resources & Citations