Conventional Loans, Explained Plainly

Best for

• Buyers with a solid credit history and steady, easy-to-document income
• Anyone who wants their mortgage insurance to eventually go away instead of following the loan for life
• Buyers putting down more than the minimum, where conventional pricing tends to reward you
• Purchases that aren't a primary residence — second homes and rentals generally can't use FHA, VA, or USDA

Maybe not if…

• Your credit file is thin or damaged — FHA was built for exactly that and often costs less in that case
• You're eligible for VA or USDA, both of which can require nothing down
• Your loan amount would land above the annual conforming limit, which puts you into jumbo territory with different rules
• Your debt-to-income ratio is tight; conventional underwriting is generally less forgiving there than FHA

What you get

• Mortgage insurance that ends — this is the single biggest structural advantage over FHA
• Pricing that rewards a strong credit file, sometimes substantially
• The widest range of property types: primary homes, second homes, and investment property
• A loan that sellers and listing agents are entirely comfortable with, which quietly helps your offer

The trade-offs (straight talk)

• Credit and debt-to-income standards are generally tighter than FHA — a weaker file can cost you more here than it would there
• Mortgage insurance is priced off your credit score, so the same down payment costs two buyers different amounts
• Above the conforming limit the rules change entirely and you're shopping a jumbo
• Conventional loans generally cannot be assumed by a future buyer, because of the due-on-sale clause