- 508.809.7176
- info@dovetail-mortgage.com
Conventional Loans
A conventional loan is a mortgage that is not insured or guaranteed by a federal government agency such as the FHA, VA, or USDA. Conventional mortgages are among the most commonly used financing options for purchasing or refinancing a home.
Conventional financing can offer flexibility for qualified borrowers, including options for primary residences, second homes, and investment properties. Depending on the loan program and borrower qualifications, some conventional purchase loans may allow financing up to 97% of the home’s value.
At Dovetail Mortgage, we work with multiple wholesale lenders to help borrowers compare available mortgage programs and identify financing options appropriate for their individual circumstances.
Conforming Conventional Loans
Section Sub-Heading
Since mortgages can take up to 30 years to pay off, mortgage lenders typically can’t afford to wait for a full mortgage term to get that money back; they need cash flow to continue to lend new mortgages to home buyers.
To provide that cash flow, investors purchase mortgage notes from lenders. The investor may keep a small number of mortgages in its portfolio, and the rest will be securitized and sold on the bond market.
The largest buyers of conventional mortgages are Fannie Mae and Freddie Mac. These two companies are government-sponsored enterprises. This means that, while they operate independently of the government, they are subject to some supervision that ensures that they’re operating in a responsible way. The government agency that supervises Fannie and Freddie is called the Federal Housing Finance Agency.
Fannie and Freddie have standards for the types of mortgages they’ll buy, to ensure that the mortgage market is made up of creditworthy mortgages. If a mortgage fits within their standards and is eligible to be bought by one of these GSEs, it’s considered to be a conforming loan.
Non-Conforming Conventional Loans
Section Sub-Heading
Non-conforming loans are ineligible to be sold to Fannie Mae or Freddie Mac. When a lender makes a non- conforming loan, they may hold it in their portfolio or sell it to a private investor. The most common type of non-conforming loan is a jumbo loan.
Each year, the FHFA publishes limits for the maximum loan amounts for conforming loans. In most areas in the U.S. in 2025, you can’t get a conforming loan (for a single family) for an amount larger than $806,500. In some areas that have been deemed “high cost” (Los Angeles or New York City), the limit is $1,209,750.
If you want to use a mortgage to purchase a house that costs more than your area’s conforming loan limit you’ll have to get a jumbo loan.
Non-conforming loan requirements are left up to individual lenders, and can vary depending on what type of loan you’re getting. With a jumbo loan, you can expect lenders to have stricter approval requirements than with conforming loans.
Qualifications
Section Sub-Heading
You will need a down payment to qualify for a conventional loan. Though you can put as little as 3% down when you get a conventional loan, a lower down payment requires PMI (private mortgage insurance). With 20% down you can avoid paying PMI.
You may have a fixed or adjustable rate. With a fixed rate, your interest remains the same throughout the life of the loan, from your first payment to your last. With an adjustable rate, the rate is periodically modified based on the market.
Your initial interest rate is determined by a combination of different factors, including market conditions, the type of loan you’re getting, the amount you’re borrowing and your creditworthiness. To get the best rate possible, you may want to first take some time to improve your credit score, lower your DTI (debt to income ratio) or save more money for a down payment before applying for a mortgage.
Frequently Asked Questions Regarding Conventional Loans
A conventional mortgage is a home loan that is not insured or guaranteed by a federal government agency. Many conventional loans follow guidelines established by Fannie Mae or Freddie Mac, although conventional financing also includes certain non-conforming loan programs.
A conventional loan is not insured by the federal government, while an FHA loan is insured by the Federal Housing Administration.
The programs also have different requirements involving credit, down payment, mortgage insurance, property standards, and borrower eligibility. Neither option is automatically better—the appropriate financing depends on the borrower’s qualifications, property, and financial goals.
A conforming loan is a conventional mortgage that meets applicable requirements for acquisition by Fannie Mae or Freddie Mac, including maximum loan limits established annually by the Federal Housing Finance Agency (FHFA).
For 2026, the baseline conforming loan limit for a one-unit property in most of the United States is $832,750. Higher limits apply in designated high-cost areas, with a 2026 one-unit ceiling of $1,249,125 in the contiguous United States. Loan limits vary by location and number of units. FHFA.gov
A mortgage that exceeds the applicable conforming loan limit is generally considered a jumbo loan. Because these loans cannot be purchased by Fannie Mae or Freddie Mac under their standard conforming requirements, underwriting guidelines, down payment requirements, reserves, credit standards, and pricing may differ from conforming loans. FHFA.gov
Dovetail Mortgage has access to both conforming and jumbo financing options through our wholesale lending partners.
It depends on the loan program, occupancy, property type, and borrower qualifications.
Certain conventional programs permit qualified borrowers purchasing a one-unit primary residence to finance up to 97% of the property’s value, meaning a down payment as low as 3% may be possible. Other transactions require a larger down payment. Fannie Mae
A Dovetail Mortgage loan expert can review available options based on your specific circumstances.
Conventional loans with less than 20% down commonly require private mortgage insurance, or PMI.
PMI protects the lender—not the borrower—if the borrower defaults on the mortgage. The amount of PMI can vary based on factors such as the loan-to-value ratio, credit profile, loan program, and mortgage insurer.
For many conventional mortgages, yes.
Federal law generally allows eligible borrowers to request PMI cancellation when the principal balance is scheduled to reach 80% of the home’s original value, provided applicable requirements are met. PMI generally must automatically terminate when the scheduled principal balance reaches 78% of the home’s original value if the borrower is current. Additional investor and servicer requirements may apply. Consumer Financial Protection Bureau
Credit requirements vary depending on the loan program, lender, transaction, property, and other elements of the borrower’s financial profile.
Rather than focusing solely on a particular score, a mortgage professional can evaluate your overall credit profile, income, assets, debts, down payment, and other factors to determine which programs may be available.
Your debt-to-income ratio, commonly called DTI, compares certain monthly debt obligations with your qualifying monthly income.
DTI is one of several factors used when evaluating mortgage eligibility. Acceptable ratios vary based on the loan program and the borrower’s overall financial profile.
Yes. Conventional financing may be available for qualifying second homes. Requirements differ from those for a primary residence and may include different down payment, reserve, and underwriting requirements.
Yes. Conventional financing may also be available for qualifying investment properties. Down payment and other requirements generally differ from financing a primary residence.
Yes. Conventional mortgages may be available with either a fixed interest rate or an adjustable interest rate (ARM).
Which structure makes sense depends on the available loan programs, current market conditions, how long you expect to own the property, and your individual financial circumstances.
Yes. Conventional mortgages may be used for refinancing as well as purchasing a home.
Depending on eligibility and the loan program, borrowers may refinance to change their loan term or rate structure, remove a borrower, access available equity through a cash-out refinance, or accomplish another financial objective.
There isn’t one mortgage program that is best for every borrower.
Your credit profile, income, assets, debts, down payment, property type, occupancy, expected time in the home, and financial goals can all affect which mortgage options are appropriate.