Floor
3% down at 620 credit
Conventional 97 program permits 3% down for first-time buyers. HomeReady (Fannie) and Home Possible (Freddie) reduce PMI cost for income-eligible borrowers.
Conventional · the default loan
Stricter at the door.
Cleaner forever after.
Conventional loans (Fannie/Freddie) are the most-used mortgage in America. 3% down at 620+ score, PMI drops automatically at 80% LTV. Better long-term math than FHA for most borrowers with decent credit.
· Conventional basics
Five facts.
All matter.
PMI
PMI drops automatically at 80% LTV
Unlike FHA's lifetime MIP, conventional PMI falls off when you reach 78% LTV (or you can request removal at 80%). Major long-term savings.
LLPA
Loan-Level Price Adjustments
Fannie/Freddie tax loans by credit + LTV + property type. Better credit + lower LTV = lower rate. The pricing penalty for a 660 score on 95% LTV vs a 760 score on 80% can be 1%+.
Limits
Conforming loan limits
$766K (2024) in most areas, up to $1.15M+ in high-cost. Above the limit = jumbo loan (different underwriting, different pricing).
DTI
Standard DTI cap: 45-50%
Most conventional approvals run DTI through 43%. Strong files with compensating factors (large reserves, low LTV) can push to 50%.
· Watch-outs
Four traps
in conventional pricing.
Pitfall 01
Underestimating LLPA hits.
Conventional pricing is brutal at 660 credit + 95% LTV. May actually cost MORE than FHA. Always compare both.
Pitfall 02
Not checking 97 vs HomeReady eligibility.
HomeReady has lower PMI for income-eligible buyers. Many LOs default to standard Conventional 97 without checking. Ask explicitly.
Pitfall 03
Over-paying PMI.
PMI premiums vary by LTV + credit. Different lenders price PMI differently. Shop the loan, not just the rate.
Pitfall 04
Forgetting the conforming limit cap.
If your loan exceeds the conforming limit, you're in jumbo territory. Different rates, different reserves required.
Conventional is the default.
Not always the answer.
Five minutes. We compare your file across FHA, Conventional, VA, USDA — and recommend the one that actually saves money.