The Basics of Qualifying for a Conventional Loan

A paper with a text conventional home loan next to a calculatorGetting approved for a conventional mortgage can seem complicated, but understanding the basic requirements is critical to qualifying for a traditional home loan in 2023. This guide will explain everything you need to know, from a conventional loan to minimum credit scores, down payments, and approval steps. Read on to learn how to get a traditional loan successfully.

A conventional mortgage or loan is one that the federal government does not back. Conventional loans are underwritten according to requirements set by Fannie Mae and Freddie Mac and feature both conforming and non-conforming options. The most common type is a conforming conventional loan.

These government-sponsored enterprises set the guidelines lenders use to determine eligibility. Meeting conventional loan requirements allows borrowers to get lower interest rates without needing mortgage insurance. Read on for more details on qualifying, down payments, credit requirements, loan limits, and steps to take when applying for conventional financing.

Key Takeaways on Conventional Loan Requirements

Getting approved for a conventional mortgage depends heavily on your financial profile as a borrower. To qualify for a traditional loan and get the best rates, you'll generally need the following:

  • A minimum 620 credit score but ideally 660+
  • A down payment of at least 5-20% of the purchase price
  • A manageable debt-to-income ratio under 45%
  • Loan amount under conforming limits of $726,200 for 2023
  • To meet any additional requirements from the lender

What Is a Conventional Mortgage Loan?

The federal government does not guarantee or insure a conventional loan or mortgage. These loans are underwritten and funded by private lenders such as banks, credit unions, and mortgage companies and meet guidelines set by Fannie Mae and Freddie Mac.

Because conventional loans carry more risk for lenders and investors, they have stricter requirements than government-backed loans like FHA, VA, and USDA. Borrowers need good credit and the ability to make a down payment.

However, conventional loans offer competitive interest rates and more flexible options for those who qualify. You can get approved for a traditional mortgage with a down payment as low as 3-5% with good credit.

Below are the standard eligibility and underwriting requirements borrowers must meet to qualify for a conventional home loan.

Conventional Loan Requirements: Credit Score, Down Payment, Debt-To-Income Ratio

To qualify for a conventional mortgage loan, here are the essential requirements:

Minimum credit score - Most lenders require a 620 FICO score for conventional loan approval. But scores of at least 660+ will get you the very best interest rates. Some lenders may accept credit scores as low as 580 with a larger down payment.

Down payment - A conventional loan typically needs 5-20% down. With excellent credit, some lenders accept as low as 3% down. The higher your down payment, the better your interest rate will be.

Loan limits - For a conforming conventional loan in 2023, the maximum amount you can borrow is $726,200 under limits set by the Federal Housing Finance Agency. Loan amounts above this are considered non-conforming jumbo loans.

Debt-to-income ratio - Your total monthly debt payments, including the new mortgage, usually should not exceed 45% of your gross monthly income to qualify for a conventional mortgage.

Loan term - Conventional mortgages are offered in different repayment terms. The most common is a 30-year fixed-rate loan. But 15-year or 20-year conventional loans are also available.

As you can see, coming to the table with good credit, a steady income, and a down payment makes qualifying for a conventional loan much more accessible.

How to Qualify for and Get Approved for a Conventional Mortgage

To successfully get approved for a conventional home loan, follow these key steps:

Compare mortgage rates - Shop lenders to find the best interest rates. Online rate comparisons make this easy. Consider different down payments and loan terms to see offers.

Check your credit - Conventional lenders will want 620+ and, ideally, 660+ scores. Review your credit reports and pull your FICO scores. Pay down balances or dispute errors to boost your scores.

Calculate your DTI - Add up your monthly debts, then divide them by your gross monthly income to get your debt-to-income ratio. Stay under 45% to qualify for a conventional mortgage.

Gather paperwork - Have recent tax returns, W-2s, pay stubs, bank statements, and other documents needed to verify your finances and employment.

Determine your down payment - Conventional loans allow 3-20% down. Have at least 5% for the best rates, but consider putting 20% down to avoid mortgage insurance (PMI).

Get preapproved - Preapproval from a lender confirms you're eligible for financing and can get the best conventional mortgage rates. It also shows sellers you're a serious buyer.

Make an offer - With your preapproval letter, you can confidently make home offers once you find the right one.

Finalize the loan - The lender will verify your documents and assets. Once the home appraises, your loan can be finalized, and you'll head to the closing table!

Following these steps helps ensure you meet eligibility standards when applying for conventional home financing.

Who Is Eligible for Conventional Loans?

Conventional mortgages have stricter eligibility requirements because they are more risky than government-backed loans. Here is a profile of the typical traditional borrower of a loan:

  • Credit history - A 740+ credit score is usually ideal, but scores as low as 620 may be accepted with a good income and a down payment. There have been a few late payments recently.
  • Down payment - Have at least 5-20% of the purchase price saved for a down payment. The more you put down, the better.
  • Stable income - Have at least two years of steady employment history in the same field. Higher payments make qualification easier.
  • Manageable debts - Overall debt-to-income ratio of 45% or lower. Limited use of revolving credit. Few outstanding collections or judgments.
  • Loan amount - Need to borrow $726,200 or less for a single-family home to meet conforming loan limits in most areas in 2023.

Not everyone will qualify for a conventional loan, even if you meet some requirements. But they offer competitive rates for those with excellent credit, steady jobs, and saved down payment funds.

Pros and Cons of Conventional Mortgages


  • Typically, they have lower interest rates than government loans
  • Allow down payments as low as 3% with excellent credit
  • No usage fees or upfront mortgage insurance premium
  • More flexible debt-to-income ratio requirements
  • Private mortgage insurance can be removed once 20% equity is reached


  • Require at least a 620 credit score for the best rates
  • Must pay for private mortgage insurance if under 20% down
  • Loan amounts are limited to $726,200 for conforming loans
  • May require mortgage insurance for the life of the loan

Conventional loans offer competitive rates and terms for qualified borrowers. However, government loans can provide easier approval for those with less-than-perfect credit or limited savings.

Conventional Loans vs. FHA, USDA, and VA Loans

Here is a quick comparison of conventional mortgages vs. other popular government-backed loan programs:

FHA loans require a 3.5% down payment and more flexible credit requirements. But they charge upfront and annual mortgage insurance premiums.

VA loans - Offer 100% financing option for veterans and military members. No down payment or mortgage insurance is needed. Credit and income requirements still apply.

USDA loans - 100% financing available in rural areas for low to moderate-income borrowers. Offer affordable financing with income limits by location.

Each loan type has its unique benefits. Conventional loans offer lower rates if you have excellent credit. But programs like FHA, VA, and USDA can help borrowers with lower credit scores, smaller down payments, or more down incomes buy a home.

Frequently Asked Questions About Qualifying for a Conventional Loan 

Q: What are the loan limits for a conventional loan?

A: The loan limits for a conventional loan vary depending on the area and the type of property. The loan limit for a single-family home is $548,250 in most places, but it can be higher in certain high-cost areas.

Q: What does it mean for a loan to conform?

A: When a loan conforms, it meets the lending requirements set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy loans from mortgage lenders. Conforming loans typically have more favorable terms and interest rates than non-conforming loans.

Q: What is the minimum down payment required for a conventional loan?

A: The minimum down payment required for a conventional loan can vary depending on the lender and the borrower's creditworthiness. Generally, borrowers must provide a minimum down payment of at least 5% of the purchase price.

Q: What is a non-conforming loan?

A: A non-conforming loan is a type of conventional loan that does not meet the lending requirements set by Fannie Mae and Freddie Mac. Non-conforming loans are often used for high-value properties or borrowers with unique financial situations.

Q: Do I need to make a down payment for a conventional loan?

A: A down payment is usually required for a conventional loan. While some loan programs allow for less than 20% down payment, borrowers with a down payment of less than 20% usually need to pay mortgage insurance.

Q: What credit score do I need to qualify for a conventional loan?

A: To qualify for a conventional loan, borrowers generally need a credit score of at least 620. However, it's important to note that lenders may have their credit score requirements, and a higher credit score can result in better loan terms.

Q: Should I shop around for different mortgage lenders?

A: Yes, shopping around and comparing mortgage lenders is highly recommended. Lenders may offer different loan options, interest rates, and closing costs. You can find the best deal that suits your needs by shopping around.

Q: Can I get a conventional mortgage if I have student loans?

A: Having student loans does not automatically disqualify you from getting a conventional loan. However, your student loan debt will be considered when determining your eligibility. Working with a loan officer who can guide you through the process is essential.

Q: Can I get a conventional loan with a low credit score?

A: While a high credit score is generally preferred for conventional loans, borrowers with a credit score below 620 may still qualify for a loan. However, they may encounter higher interest rates and stricter lending requirements.

Q: How much income do I need to qualify for a conventional loan?

A: The income you'll need to qualify for a conventional loan will depend on various factors, including your debt-to-income ratio and the loan size. Generally, lenders prefer borrowers to have a stable job and a gross income that can comfortably cover the mortgage payment.


Carefully compare multiple-lender offers to find the best conventional mortgage rates and terms you may qualify for. With good credit, steady income, and adequate savings, you can position yourself to be eligible for affordable conventional financing.