A conventional loan is any mortgage that conforms to Fannie Mae and Freddie Mac guidelines rather than being government-insured. In 2026 that means loan amounts up to $832,750 in most counties, and up to $1,249,125 in high-cost areas like Orange and Los Angeles County. Above that, you are in jumbo territory.
For W-2 borrowers with solid credit, conventional usually wins on total cost. The down payment can be as low as 3% for qualifying buyers, private mortgage insurance drops off once you reach 20% equity (unlike FHA's insurance, which usually stays for the life of the loan), and pricing rewards credit strength directly.
What conventional loans offer
- 3% to 20%+ down: flexible entry with PMI that cancels at 20% equity
- Purchase, rate-and-term, and cash-out refinancing for primary, second homes, and rentals
- Fixed and adjustable terms: see fixed vs. ARM for choosing well
- Condo, single family, and 2-4 unit financing, including house-hacking strategies
What underwriting looks for
Two years of stable income, a debt-to-income ratio generally under 45 to 50%, documented funds for the down payment, and credit typically 620 or better (with real pricing advantages beginning around 740). If any of those pinch, that is a conversation rather than a rejection; there is nearly always another route, and often through a program built for exactly your situation.