Conventional Loan Requirements in 2026: Credit, DTI, Income & Reserves

What are the requirements for a conventional loan in 2026?

Underwriting looks at four pillars: credit (generally 620+), debt-to-income ratio, documented income and employment, and assets, meaning the down payment (from 3% on eligible programs, 5% as a common standard minimum), closing costs, and sometimes reserves, per the Fannie Mae and Freddie Mac Selling Guides.

None of the four works alone. Conventional underwriting runs your whole file through an automated underwriting system (Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Product Advisor), and the pillars trade off against each other: strong credit and reserves can carry a higher DTI, a bigger down payment can offset a thinner credit file. That's why two borrowers with the same score can get different answers, and why a single "do I qualify" number doesn't exist. What follows is each pillar in detail, with one distinction running through all of them: what Fannie and Freddie actually require versus what an individual lender adds on top.

What credit score and DTI do you need for a conventional loan?

The general Fannie Mae and Freddie Mac minimum credit score is 620. For DTI, there is no single hard cap: per the Selling Guides, ratios generally up to around 45-50% can work when the automated underwriting system approves the file and compensating factors support it.

Two honest footnotes on the score. First, 620 is a floor, not an approval; the rest of the file still has to work. Second, the score does more than open the door. Conventional pricing is risk-based through loan-level price adjustments, so a higher score generally means better pricing and cheaper PMI, not just a yes. I've broken down how those tiers work in the conventional credit score guide.

On DTI, be suspicious of any page that quotes one universal number. The automated underwriting system weighs your ratio against the whole file: a borrower with strong credit, solid reserves, and a healthy down payment can be approved at a ratio that would sink a thinner file. That's also why paying down a credit card or restructuring a car loan before you apply can matter more than any single point of credit score. I run that math with buyers before we ever submit, because the cheapest fix is the one you make before underwriting sees the file.

What income and employment history do you need?

Underwriting wants income that is documented, stable, and likely to continue, typically shown with a two-year history, per the Fannie Mae and Freddie Mac Selling Guides. For most W-2 borrowers that means recent pay stubs, two years of W-2s, and a verification of employment.

The two-year lens is about the pattern, not the employer. Changing jobs inside the same field, or finishing school and starting a career, usually reads as continuity. What draws scrutiny is income that's hard to predict: commission, bonus, and overtime generally need their own history before underwriting counts them, and a recent switch from salary to commission can shrink your usable income on paper even when your bank account says otherwise. Gaps in employment aren't automatic problems either; they need an explanation, not an apology. If your income has a story, tell me the story before we apply. Qualifying income is a calculation, and I'd rather calculate it up front than have an underwriter do it for us with surprises.

Why do conventional loan requirements differ from lender to lender?

Because there are two layers of rules. Fannie Mae and Freddie Mac set the baseline in their Selling Guides; individual lenders may add stricter standards on top, called overlays. When one lender says no at a 620 score or a higher DTI, that's often that lender's overlay talking, not the GSE rule.

Overlays are legitimate business decisions; lenders are allowed to be more conservative than the guideline. The problem is how they get repeated: a borrower hears "you need a 660" or "your DTI is too high" from one loan officer and walks away believing conventional financing said no, when one company's credit policy said no. This is exactly where the broker model earns its keep. With access to 100+ lenders, I can match a file that meets the Fannie/Freddie baseline to a lender whose overlays don't block it, instead of forcing every borrower through one company's filter. To be clear, that is matching, not magic: no one can move the GSE baseline, and a file that doesn't meet it needs work or a different program, not a different lender. If you've been told no, the useful question is which layer said it.

How much in reserves do you need for a conventional loan?

It depends on the transaction. Per the Fannie Mae and Freddie Mac Selling Guides, many primary-residence purchases require little or no reserves, while second homes, investment properties, and borrowers with multiple financed properties require more. There is no universal month count.

Reserves are the money you'd still have after closing, measured in months of your full housing payment. Underwriting cares because a buyer with a cushion survives a bad month; a buyer who empties every account at the closing table doesn't. The requirement scales with risk: occupancy is the biggest driver (an investment property demands more cushion than the home you live in), and each additional financed property raises the bar again. The automated underwriting system can also ask for reserves as a compensating factor on a file with a higher DTI. The exact figure comes from your loan profile when the file is run, which is why I won't quote one here, and why anyone who does is describing their lender's policy, not the rule. Retirement accounts and other assets can often count at a discounted value, so "I don't have reserves" is sometimes wrong in the borrower's favor.

Can you get a conventional loan when you're self-employed?

Yes. Self-employed borrowers use the same conventional loans as everyone else; the difference is documentation. Per the Fannie Mae and Freddie Mac Selling Guides, that typically means two years of personal and business tax returns, with qualifying income calculated from what those returns show.

Here's the trap: the same write-offs that shrink your tax bill shrink your qualifying income, because underwriting starts from your net figures, not your gross deposits. A business owner grossing well into six figures can look modest on paper after depreciation, mileage, and expenses do their work. This is a specialty of mine: structuring self-employed files to qualify conventional, using the add-backs the Selling Guides actually allow (depreciation is the classic), the right mix of business and personal returns, and timing the application around your tax filings. A conversation with your tax professional before filing season can be worth real money here, because a return optimized purely for taxes can cost you the conventional approval. And when the returns genuinely won't support conventional qualifying, the answer isn't to give up; it's a bank statement loan, a separate program that qualifies you on business deposits instead of tax returns. I'll tell you straight which side of that line your file sits on, because pushing a conventional-eligible borrower into a pricier program is exactly the move this site exists to call out. For the wider self-employed picture across every loan type, see my self-employed mortgage hub, and for how underwriters turn your returns into qualifying income, my guide on how self-employed income is calculated.

One more pillar to round out the picture: the cash. The down payment side of qualifying, including the 3% programs, gift funds, and how your down payment changes PMI, lives in the conventional down payment guide, and the PMI math itself is in the conventional PMI guide. Worth noting while you're comparing: conventional financing covers primary residences, second homes, and investment properties alike, per the Fannie Mae / Freddie Mac Selling Guides, a range FHA and VA don't offer.