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3% Down Programs
Some first-time or qualifying buyers may be eligible for Conventional programs with as little as 3% down, subject to income, occupancy, property, AUS, and investor requirements.
Conventional loan strategy
Conventional Loans Built for Stronger Borrower Profiles
A flexible mortgage option for buyers with solid credit, stable income, and a strategy for managing down payment, mortgage insurance, and long-term monthly payment.
Fannie Mae & Freddie Mac options3% down programs availableMI optionsPrimary, second home, and investment use cases
Why Conventional matters
The flexible option for borrowers who fit the box.
Conventional loans are not government-insured loans. They are commonly backed by Fannie Mae and Freddie Mac, which means the approval path is shaped by agency guidelines, automated underwriting, investor rules, and lender overlays.
For stronger borrowers, Conventional financing can offer meaningful flexibility in property type, occupancy, down payment strategy, mortgage insurance structure, and long-term payment planning.
Conventional may be a better fit when credit score, debt-to-income ratio, reserves, income documentation, and property condition support the file. It is broad, but it is still underwritten carefully.
Down payment options
Conventional does not mean one-size-fits-all.
A Conventional strategy can be built around available cash, monthly payment comfort, mortgage insurance cost, reserves, occupancy, property type, and automated underwriting strength.
5% Down Standard Path
A 5% down Conventional structure is a common primary residence option for borrowers who want flexibility without reaching a 20% down payment.
10%–15% Down Scenarios
Putting more down may improve the risk profile, reduce mortgage insurance cost, and strengthen the approval story when other factors need support.
20% Down Position
At 20% down, monthly mortgage insurance is usually no longer required, though the final structure still depends on loan terms, occupancy, property type, and lender requirements.
Below 20% down, mortgage insurance may apply unless the loan is structured differently. Final eligibility, pricing, and mortgage insurance terms depend on the complete file.
Mortgage insurance strategy
PMI is part of the planning conversation, not just a line item.
Borrower-paid mortgage insurance is common when putting less than 20% down on a Conventional loan. Unlike some government mortgage insurance structures, Conventional PMI is not always permanent.
Many borrowers may be able to request PMI cancellation around 80% loan-to-value, and automatic termination may occur at 78% loan-to-value, subject to loan terms, payment history, servicer rules, and applicable law.
Borrower-paid MI
Borrower-paid MI usually appears as a separate monthly mortgage insurance line item. The cost can vary based on credit score, down payment, loan term, occupancy, property type, and other risk factors.
Lender-paid MI
Lender-paid MI may be an option, but it is usually built into the interest rate instead of appearing as a monthly MI line item. The tradeoff can be lower visible monthly MI versus a potentially higher rate.
“Conventional is always cheaper than FHA.”
Conventional MI may be cancellable, while FHA mortgage insurance can last longer depending on down payment and loan terms. That does not automatically make Conventional the cheapest option for every borrower.
The reality is more nuanced:
- Conventional rates are often higher than government loan rates, especially when credit scores or risk factors are weaker.
- FHA may still be better for some buyers with lower FICO scores, higher DTI, or thinner credit.
- Conventional may be better for stronger borrowers or when property condition is an issue.
- The better answer depends on rate, MI or MIP, cash to close, payment, property, and approval strength.
Underwriting fit
Conventional can be efficient when the profile fits.
Conventional loans can move smoothly when the borrower profile aligns with automated underwriting. They tend to favor stronger credit, durable income, lower debt load, and documented financial cushion.
True manual underwriting on Conventional loans is limited and difficult to find compared to FHA or VA. Conventional files usually depend heavily on automated underwriting results through Fannie Mae DU or Freddie Mac LPA.
Stronger Conventional files often show:
- Higher FICO scores
- Lower debt-to-income ratios
- Stronger reserves after closing
- Clean recent credit history
- Stable, documented income
- Strong AUS approval through Fannie Mae DU or Freddie Mac LPA
Property condition advantage
Conventional may be more flexible on minor condition concerns.
Conventional property condition requirements are generally more relaxed than FHA, VA, or USDA. This can matter when a home has cosmetic issues or minor deferred maintenance that might create repair conditions under a government loan.
Where this can help:
- Cosmetic issues may be less of a problem than they are with some government loan programs.
- Minor deferred maintenance may be easier to work with when safety, soundness, and marketability are still supported.
- Conventional financing can sometimes help when a property condition concern could trigger FHA, VA, or USDA repair requirements.
- The home must still meet lender, investor, appraisal, safety, soundness, and marketability requirements.
Citizenship & residency flexibility
Conventional may still support more borrower situations.
With recent government loan restrictions around citizenship and residency, Conventional loans may still provide flexibility for borrowers whose legal residency, employment authorization, income, and documentation fit investor requirements.
Eligibility depends on legal residency status, documentation, income stability, investor rules, and lender overlays. Every scenario should be reviewed before assuming a borrower fits or does not fit.
Potentially eligible borrower categories may include:
- U.S. citizens
- Permanent residents and green card holders
- Eligible visa holders
- Borrowers with work authorization
- Certain non-permanent resident borrowers when documentation and investor rules support the file
Best-fit borrower profile
Conventional can serve more than one kind of buyer.
Conventional is broad enough to support primary residence buyers, second home buyers, and investment property buyers when the full borrower and property profile supports the program.
Strong Credit Buyer
A borrower with solid FICO scores, stable income, and a clean recent credit pattern may benefit from Conventional pricing and structure.
5%–20% Down Buyer
Conventional can support multiple down payment levels, allowing the strategy to be shaped around payment, cash to close, and reserves.
Cancellable MI Potential
Borrowers who want mortgage insurance that may be cancellable later may compare Conventional PMI against FHA MIP rules.
Minor Condition Concerns
A property with cosmetic or minor maintenance issues may fit Conventional more smoothly than some government-backed programs.
Reserve-Strong Borrower
Money left after closing can help the file look more durable, especially when AUS or pricing is sensitive to risk.
Visa or Work Permit Borrower
Eligible borrowers who may not fit government loan rules may still have Conventional options depending on residency, documentation, and overlays.
Second Home or Investment Buyer
Conventional financing may support primary homes, second homes, and investment properties when occupancy and investor rules are met.
Not always the best fit
Conventional is not the default answer for every file.
A borrower may be better served by FHA, VA, USDA, down payment assistance, or another path when the approval strength, payment, rate, cash to close, or underwriting flexibility is better elsewhere.
Conventional may be less ideal with:
- Lower FICO score profile
- Higher debt-to-income ratio
- Limited reserves after closing
- Recent major credit events
- Thin or limited credit history
- Need for manual underwriting flexibility
- Borrower benefits more from FHA, VA, USDA, or assistance programs
Compare before choosing
Let's compare the numbers before choosing the loan.
The right answer is not always Conventional or FHA by default. We compare rate, MI/MIP, cash to close, monthly payment, property condition, and approval strength before recommending the path.