Loan Types

Conventional Loan

A conventional loan is a mortgage that isn't backed by a government program like FHA or VA. It often needs solid credit, but it can allow down payments as low as 3% and lets you drop mortgage insurance once you build enough equity. It's the most common loan type for many buyers.

Conventional loans aren’t insured by a government agency, so they rely on your credit and overall financial picture. The upside for many buyers is flexibility: low-down-payment options exist, and the private mortgage insurance you may pay with less than 20% down can usually be removed once you reach enough equity, which lowers your payment later.

Whether conventional beats FHA depends on your credit and down payment. Strong credit often makes conventional the cheaper long-term choice, while FHA may be friendlier if your credit is still improving. There’s no one right answer for everyone, so it’s worth comparing both side by side before you choose. I’m happy to run that comparison for you.

Related terms

FHA Loan

An FHA loan is a mortgage insured by the Federal Housing Administration. It often allows a lower down payment and more flexible credit guidelines than conventional loans, which helps many first-time and credit-rebuilding buyers. The trade-off is mortgage insurance (MIP), which on many FHA loans can last longer than conventional PMI.

Conforming Loan

A conforming loan is a conventional loan that meets the guidelines and loan limits set by Fannie Mae and Freddie Mac. Staying within the conforming limit often means more competitive terms. Loans above that limit are called jumbo loans and follow different rules, since they can't be sold to those agencies.

PMI (Private Mortgage Insurance)

PMI, or private mortgage insurance, is a fee that protects the lender, not you, when you put less than 20% down on a conventional loan. It's usually added to your monthly payment. Once you build enough equity, you can often request to have PMI removed, which lowers your payment.

Last updated: June 5, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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