How To Qualify for a Conventional, Fannie Mae, or Freddie Mac Loan

Conventional Loan Requirements

Couple closing on a new home loan, shaking hands over a table
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A conventional mortgage loan is one that isn't backed by a government entity like the Federal Housing Administration. Conforming conventional mortgages adhere to underwriting guidelines set by mortgage financing giants Fannie Mae and Freddie Mac.

Conventional loans may offer lower interest rates than those insured by the government. You'll need good credit, a steady income, and the funds to cover a down payment to qualify for one of these loans. They can also be faster to close than their government-backed counterparts.

Learn more about conventional mortgages and their requirements.

Key Takeaways

  • A conventional mortgage is a home loan that's not part of a government program.
  • Some conventional mortgages are conforming. This means they meet the standards set by Freddie Mac and Fannie Mae.
  • Some conventional mortgages require private mortgage insurance (PMI) if you make a down payment of less than 20%.

What Is a Conventional Mortgage?

Conventional loans include both conforming and non-conforming loans. A conforming loan meets the guidelines of Freddie Mac and Fannie Mae. These are government-sponsored enterprises—private companies that were started by the government. They back mortgages to reduce the risk to lenders.

Freddie Mac and Fannie Mae have guidelines for their mortgages. One of these is that the loans have limits. The conforming loan limit is $647,200 in 2022, up from $548,250 in 2021, in most areas of the United States. The limit is higher in areas with a higher cost of living. The maximum loan size for a high-cost area is $822,375 in 2021, increasing to $970,800 in 2022.

Conforming mortgages can have a fixed or adjustable interest rate. A fixed interest rate means that your rate stays the same for the length of your mortgage. An adjustable rate mortgage means that the rate can go up or down.

Conforming Conventional Loan Requirements

Fannie Mae and Freddie Mac require that all borrowers meet certain credit scores, income levels, work history, debt-to-income ratios, and minimum down payments. A few of the items a lender will look at when considering financing include:

  • Your total monthly expenses
  • Your total gross income per month
  • Your employment history
  • Your credit score and payment history
  • Your assets, including checking, savings, and retirement accounts

Your mortgage lender might ask for more information after personally reviewing your application. Some basic requirements for conforming loans include:

  • A minimum credit score of 620
  • Total debt-to-income ratio of 45% or less
  • A down payment of 3% or more
  • Down payment funds coming from a documented asset source
  • Income limits for some Fannie Mae and Freddie Mac loans
  • A certain amount of cash reserves depending on your credit score and debt-to-income ratio


You may need to take a homebuyer education class to qualify for a Fannie Mae or Freddie Mac mortgage.

Private Mortgage Insurance

Fannie Mae and Freddie Mac mortgages may also require that you purchase private mortgage insurance (PMI). PMI protects the lender if you stop paying your mortgage and your home goes into foreclosure. It's a monthly fee added to your mortgage payment. PMI is often required if you make a down payment of less than 20% of the purchase price.

You can cancel your PMI once you reach 20% equity in your home. Your lender must cancel your PMI when you reach 22% equity in your home or when you reach the midpoint of your loan's payment schedule, whichever comes first.

FHA vs. Conforming Conventional Mortgages

FHA loans require that a property meet strict guidelines as far as price, location, and condition. Conventional lenders aren't bound by these same rules.

FHA loans also have less stringent credit score requirements than conforming mortgages. You might qualify with a score as low as 500 to 580. You most likely won't be hit with extra fees or higher rates if your credit score is less than average.

Conventional loans can be used to finance just about any type of property. Some condo complexes and certain houses aren't approved for FHA financing.

Either mortgage option could work for many borrowers. Contact lenders and discuss both to find out which is the best fit for you. Lenders can help you determine which option is best for your financial situation and homeownership needs.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Federal Housing Finance Agency. "FHFA Announces Conforming Loan Limits for 2021."

  2. Federal Housing Finance Agency. "FHFA Announces Conforming Loan Limits for 2022."

  3. Fannie Mae. "97% Loan to Value Options."

  4. Freddie Mac. "Home Possible Income and Property Eligibility Tool."

  5. Fannie Mae. "Eligibility Matrix," Pages 2, 4.

  6. Consumer Financial Protection Bureau. "When Can I Remove Private Mortgage Insurance (PMI) From My Loan?"

  7. Congressional Research Service. "FHA-Insured Home Loans: An Overview," Page 5.

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