What we verified in “Conventional loan: 3% down, PMI and credit scores”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to the CFPB, 'conventional' just means the loan is not part of a specific government program; conventional loans typically cost less than FHA loans but can be harder to get; conforming loans have maximum loan amounts set by the government, and their other rules are set by Fannie Mae or Freddie Mac, companies that back those loans; with a down payment of less than 20% you typically need mortgage insurance; for jumbo loans rules vary by lender, but they usually require good credit and a high down payment; and you should never make a final decision before getting your official Loan Estimates.

   Sources 1 · Conventional loans (page last modified Oct. 16, 2024): '“Conventional” just means that the loan is not part of a specific government program'; 'Conventional loans typically cost less than FHA loans but can be more difficult to get'; 'There are two main categories of conventional loans'; 'Conforming loans have maximum loan amounts that are set by the government'; 'Other rules for conforming loans are set by Fannie Mae or Freddie Mac'; 'companies that provide backing for conforming loans'; 'If your down payment is less than 20%, you’ll typically need mortgage insurance'; 'Rules vary by lender, but usually need good credit and a high down payment to qualify'; 'Never make a final decision about which loan to take before getting your official Loan Estimates' · Checked October 17, 2026

2. According to FHFA, Fannie Mae and Freddie Mac are restricted by law to buying single-family mortgages with origination balances below a specific amount, the 'conforming loan limit'; loans above it are jumbo loans; four statutorily designated high-cost areas (Alaska, Hawaii, Guam and the U.S. Virgin Islands) have higher limits; and the Housing and Economic Recovery Act of 2008 (HERA) set a permanent formula, under which the 2026 limits were set.

   Sources 2 · FHFA Conforming Loan Limits: 'Fannie Mae and Freddie Mac are restricted by law to purchasing single-family mortgages with origination balances below a specific amount, known as the “conforming loan limit” (CLL)'; 'Loans above this amount are known as jumbo loans'; 'four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands'; 'a permanent formula was established under the Housing and Economic Recovery Act of 2008 (HERA)'; 'The 2026 conforming loan limits have been set under the HERA formula' · Checked October 17, 2026

3. According to Fannie Mae's Selling Guide, HomeReady is a conventional community lending mortgage with underwriting flexibilities for borrowers who meet specific income criteria; it is for purchases or limited cash-out refinances of one- to four-unit homes used as the borrower's principal residence; above 95% LTV (95.01% to 97%) it must be a purchase or limited cash-out refinance, a fixed-rate loan with a term of up to 30 years, on a one-unit home, underwritten with DU only; total annual qualifying income may not exceed 80% of the area median income (AMI) for the property's location; and homeownership education is required when all occupying borrowers are first-time homebuyers.

   Sources 3 · B5-6-01, HomeReady Mortgage Loan and Borrower Eligibility (06/04/2025): 'a conventional community lending mortgage that offers underwriting flexibilities to qualified borrowers who meet specific income criteria'; 'for one- to four-unit properties used as the borrower’s principal residence'; 'LTV, CLTV, or HCLTV Ratio 95.01 to 97%'; 'Purchase transactions or limited cash-out refinances only'; 'Fixed-rate loans with terms up to 30 years'; 'One-unit principal residence'; 'Underwriting Method DU only'; 'the total annual qualifying income may not exceed 80% of the AMI for the property’s location'; 'Homeownership education is required for HomeReady purchase loans when all occupying borrowers are first-time homebuyers' · Checked October 17, 2026

4. According to Fannie Mae's Selling Guide, on HomeReady the maximum LTV for a one-unit principal residence is 97% with DU and 95% when manually underwritten; on a one-unit purchase above 80% LTV no minimum contribution from the borrower's own funds is required; non-occupant borrowers are permitted; rent paid by people who live with you (related or not) can count as income, up to 30% of qualifying income, if they have lived with you and paid you for the last 12 months; cash-on-hand can be used for the down payment and closing costs on a one-unit home if you customarily use cash and the funds are on deposit at application or at least 30 days before closing; and, on manually underwritten loans, a low score caused by an insufficient credit history can be accepted when supplemented with a nontraditional credit profile.

   Sources 4 · B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements (11/05/2025): '95% versus 97% for one-unit principal residences'; 'A minimum borrower contribution from the borrower's own funds in not required'; 'Non-occupant borrowers are permitted on HomeReady mortgages'; 'who reside with the borrower (who may or may not be related to the borrower)'; 'up to 30% of the total gross income that is used to qualify the borrower'; 'has lived with the borrower for the last 12 months'; 'cash-on-hand as an acceptable source of funds for the borrower’s down payment, funds for closing costs, and prepaid items'; 'The borrower customarily uses cash for expenses'; 'Funds must be on deposit at the time of application, or no less than 30 days prior to closing'; 'low due to an insufficient traditional credit history'; 'an acceptable nontraditional credit profile' · Checked October 17, 2026

5. According to Freddie Mac, Home Possible is a low down payment mortgage for low- and very low-income borrowers, with a 3% down payment that can come from a variety of sources, such as family, employer-assistance programs, secondary financing and sweat equity; qualifying income is limited to 80% of area median income (AMI), and Freddie Mac offers an income and property eligibility tool; the maximum LTV is 97% on a one-unit home; mortgage insurance on one-unit homes can be cancelled once the balance drops below 80% of the appraised value and cancellation criteria are met; and MI coverage requirements are reduced above 90% LTV; the page notes it does not replace Freddie Mac's Seller/Servicer Guide.

   Sources 5 · Home Possible® (Freddie Mac Single-Family): 'a low down payment mortgage solution for low- and very low-income borrowers'; 'A 3% down payment with flexible sources of funding'; 'Down payment can come from a variety of sources, including family, employer-assistance programs, secondary financing, and sweat equity'; 'Qualifying income is limited to 80% of area median income (AMI)'; 'Home Possible ® Income and Property Eligibility Tool'; 'Low down payment with a maximum of 97% LTV'; 'can be cancelled after loan balance drops below 80% of the home's appraised value and cancellation criteria are met'; 'MI coverage requirements are reduced for LTV ratios above 90%'; 'is not a replacement or substitute for, the requirements found in the Freddie Mac Single-Family Seller/Servicer Guide' · Checked October 17, 2026

6. According to Fannie Mae's Selling Guide, the minimum credit score for manually underwritten loans is 620 for fixed-rate loans and 640 for adjustable-rate loans (ARMs); with one borrower the representative score counts and with several, the average median score; DU loan casefiles have no minimum score, because DU assesses risk with its own factors; there are exceptions, such as loans where no borrower has a credit score; and loan-level price adjustments (LLPAs) are based on the representative score, among other things.

   Sources 6 · B3-5.1-01, General Requirements for Credit Scores (04/22/2026): 'Manually underwritten loans'; 'Loans with one borrower - representative credit score'; 'Loans with more than one borrower - average median credit score'; 'The minimum credit score that applies for loan eligibility is: 620 — fixed-rate loans 640 — ARMs'; 'A minimum credit score is not required for DU loan casefiles'; 'DU will assess a borrower's creditworthiness'; 'loans where no borrower has a credit score'; 'Loan-level price adjustments (LLPAs) are assessed based on the representative credit score for the loan' · Checked October 17, 2026

7. According to Fannie Mae's Selling Guide, the debt-to-income (DTI) ratio compares total monthly obligations, including the new house payment, with the monthly income of all borrowers; on manually underwritten loans the maximum is 36% of stable monthly income, which can go up to 45% if the borrower meets credit score and reserve requirements; and with DU the maximum is 50%.

   Sources 7 · B3-6-02, Debt-to-Income Ratios (04/02/2025): 'total monthly obligations, which includes the qualifying payment for the subject mortgage loan'; 'For manually underwritten loans, Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income'; 'The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements'; 'For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%' · Checked October 17, 2026

8. According to Fannie Mae's Selling Guide, the lender must obtain primary mortgage insurance for a conventional first mortgage with an LTV above 80%; on a purchase, the value used for the LTV is the lower of the sales price or the appraised value; and premium plans can be monthly (no payment at closing), annual, single-premium at closing or split (a payment at closing plus a monthly premium).

   Sources 8 · B7-1-01, Provision of Mortgage Insurance (04/02/2025): 'the lender must obtain a primary mortgage insurance policy for a conventional first mortgage loan that has an LTV ratio greater than 80%'; 'For a purchase money loan, the value used in determining the LTV ratio is the lower of the sales price or the appraised value of the security property'; 'monthly plans – monthly premiums from accumulated escrow deposits (with no initial payment at closing)'; 'single-premium plans – lump-sum premium at closing to purchase life-of-the-mortgage coverage'; 'split-premium plans' · Checked October 17, 2026

9. According to the CFPB, PMI is insurance you might be required to buy on a conventional loan with less than 20% down; it protects the lender, not you, and you can still lose your home to foreclosure if you fall behind; the most common way to pay is a monthly premium, shown on page 1 of the Loan Estimate and Closing Disclosure; sometimes it is a one-time upfront premium, and if you move or refinance you might not get a refund of it; some lenders offer low-down-payment conventional loans without PMI in exchange for a higher interest rate, which can cost more or less depending on how long you stay; and with 20% down, PMI is not required.

   Sources 9 · What is private mortgage insurance? (last reviewed Aug. 28, 2023): 'take out a conventional loan with a down payment of less than 20 percent of the purchase price'; 'PMI protects the lender—not you—if you stop making payments on your loan'; 'you can still lose your home through foreclosure'; 'The most common way to pay for PMI is a monthly premium'; 'on page 1, in the Projected Payments section'; 'If you make an up-front payment and then move or refinance, you might not be entitled to a refund of the premium'; 'As a tradeoff, you usually pay a higher interest rate for these loans'; 'When you pay 20 percent down, PMI is not required with a conventional loan' · Checked October 17, 2026

10. According to the CFPB, private mortgage insurance (PMI) on a conventional loan varies with the down payment and credit score but is generally cheaper than FHA's for borrowers with good credit; most PMI is paid monthly, with little or no payment at closing; and under certain circumstances it can be cancelled.

    Sources 10 · What is mortgage insurance and how does it work? (last reviewed Aug. 28, 2026): 'Private mortgage insurance (PMI) rates vary by down payment amount and credit score but are generally cheaper than FHA rates for borrowers with good credit'; 'Most private mortgage insurance is paid monthly, with little or no initial payment required at closing'; 'Under certain circumstances, you can cancel your PMI' · Checked October 17, 2026

11. Under the Homeowners Protection Act (12 U.S.C. §4901), the cancellation date is when the balance, based on the initial amortization schedule, is first scheduled to reach 80% of the home's original value, or when it reaches 80% through actual payments; the termination date is when the balance, based on the initial schedule (or the schedule in effect on an adjustable-rate loan), is first scheduled to reach 78% of the original value; original value is the lesser of the contract sales price or the appraised value at closing (on a refinance, the appraised value the lender relied on); and a good payment history means no payment 60 or more days late in the 12-month period beginning 24 months before, and none 30 or more days late in the preceding 12 months.

    Sources 11 · 12 U.S.C. §4901(2), (4), (12) and (18): 'is first scheduled to reach 80 percent of the original value of the property securing the loan'; 'based solely on actual payments, reaches 80 percent of the original value of the property securing the loan'; 'is first scheduled to reach 78 percent of the original value of the property securing the loan'; 'means the lesser of the sales price of the property securing the mortgage, as reflected in the contract, or the appraised value'; 'made a mortgage payment that was 60 days or longer past due during the 12-month period beginning 24 months before'; 'made a mortgage payment that was 30 days or longer past due during the 12-month period preceding' · Checked October 17, 2026

12. Under the Homeowners Protection Act (12 U.S.C. §4902), PMI is cancelled on the cancellation date, or later, if you ask the servicer in writing, have a good payment history, are current and meet the holder's requirements to show that the home's value has not declined below the original value and that your equity is not encumbered by a subordinate lien; it terminates automatically on the termination date if you are current, or on the first day of the month after you become current; in no case can it be required beyond the first day of the month after the midpoint of the amortization period if you are current; no premiums can be charged more than 30 days after cancellation or termination; the servicer must return unearned premiums within 45 days; and these cancellation and termination rules do not apply to certain high-risk loans.

    Sources 12 · 12 U.S.C. §4902(a)–(c), (e)–(g): 'submits a request in writing to the servicer that cancellation be initiated'; 'has a good payment history with respect to the residential mortgage'; 'the value of the property securing the mortgage has not declined below the original value of the property'; 'is unencumbered by a subordinate lien'; 'on the termination date if, on that date, the mortgagor is current on the payments required'; 'on the first day of the first month beginning after the date that the mortgagor becomes current'; 'beyond the first day of the month immediately following the date that is the midpoint of the amortization period of the loan'; 'more than 30 days after'; 'Not later than 45 days after the termination or cancellation of a private mortgage insurance requirement under this section, all unearned premiums'; 'Exceptions for high risk loans' · Checked October 17, 2026

13. Under the Homeowners Protection Act (12 U.S.C. §4903), when PMI is required, at closing on a fixed-rate loan the lender must give you a written initial amortization schedule and a notice with the date you may request cancellation, that you may request it earlier based on actual payments, and the automatic termination date; on an adjustable-rate loan, a notice that the servicer will tell you when the cancellation date arrives; and every year the servicer must send a written statement of your cancellation and termination rights, with an address and phone number to ask.

    Sources 13 · 12 U.S.C. §4903(a)(1)–(3): 'a written initial amortization schedule'; 'indicating the date on which the mortgagor may request cancellation, based solely on the initial amortization schedule'; 'earlier than provided for in the initial amortization schedule, based on actual payments'; 'and what that termination date is with respect to that mortgage'; 'the servicer will notify the mortgagor when the cancellation date is reached'; 'an annual written statement'; 'an address and telephone number that the mortgagor may use to contact the servicer' · Checked October 17, 2026

14. According to the CFPB, you have the right to remove PMI on many principal-residence mortgages closed on or after July 29, 1999; the first date you can request cancellation should appear on the PMI disclosure form you received with your mortgage; you can request it earlier if extra payments bring your balance to 80% of the original value; you must also certify there are no junior liens (such as a second mortgage) and show, for example with an appraisal, that the value has not declined; PMI ends automatically at 78% if you are current; and it also ends at the midpoint of the loan, after 15 years on a 30-year loan, even if the balance has not reached 78%. Fannie Mae and Freddie Mac may have their own cancellation guidelines, but they cannot be less favorable.

    Sources 14 · When can I remove private mortgage insurance (PMI) from my loan? (last reviewed Aug. 28, 2026): 'mortgages for single-family principal residences that closed on or after July 29, 1999'; 'The first date you can make the request should appear on your PMI disclosure form'; 'if you have made additional payments that reduce the principal balance of your mortgage to 80 percent of the original value of your home'; 'You can certify that there are no junior liens (such as a second mortgage) on your home'; 'evidence (for example, an appraisal )'; 'scheduled to reach 78 percent of the original value of your home'; 'even if the principal balance has not reached 78 percent of the original value of your home'; 'For 30-year loans, the midpoint is after 15 years have passed'; 'these guidelines cannot be less favorable to the borrower than the ones above' · Checked October 17, 2026

15. According to Fannie Mae's Selling Guide, on a principal residence or second home you can use a gift from an acceptable donor for all or part of the down payment, closing costs or reserves; a relative (by blood, marriage, adoption or legal guardianship) or someone with a familial relationship, such as a domestic partner, fiancé or fiancée, or a person with a long-standing familial-like or mentorship relationship, can give it; the donor cannot be or be affiliated with the builder, the real estate agent or another interested party; on a one-unit principal residence no contribution from your own funds is required; and the gift is documented with a letter signed by the donor stating the amount, that no repayment is expected, and the donor's details and relationship.

    Sources 15 · B3-4.3-04, Personal Gifts (02/04/2026): 'Gift funds may fund all or part of the down payment, closing costs, or financial reserves'; 'related to the borrower by blood, marriage, adoption, or legal guardianship'; 'domestic partner (or relative of the domestic partner), individual engaged to marry the borrower'; 'an individual with a long-standing familial-like or mentorship relationship with the borrower'; 'The donor may not be, or have any affiliation with, the builder, the developer, the real estate agent'; 'A minimum borrower contribution from the borrower's own funds is not required. All funds needed to complete the transaction can come from a gift.'; 'include the donor’s statement that no repayment is expected' · Checked October 17, 2026

16. According to Fannie Mae's Selling Guide, contributions from interested parties (such as the seller, the builder or the agent) cannot be used for the down payment, reserves or the minimum borrower contribution; they can cover closing costs, including prepaids; and on a principal residence they are capped, based on the lower of the sales price or appraised value: 3% above 90% LTV, 6% from 75.01% to 90%, and 9% at 75% or less.

    Sources 16 · B3-4.1-02, Interested Party Contributions (IPCs) (05/07/2025): 'Fannie Mae does not permit IPCs to be used to make the borrower's down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements'; 'the property seller'; 'Borrower closing costs, including prepaids'; 'calculated using the lower of the sales price or appraised value (not the loan amount)'; 'Greater than 90% 3%'; '75.01% – 90% 6%'; '75% or less 9%' · Checked October 17, 2026

17. According to Fannie Mae's Selling Guide, Fannie Mae buys mortgages made to non-U.S. citizens who are lawful permanent or non-permanent residents on the same terms available to U.S. citizens; it does not specify the exact documents: the lender decides case by case, using the documentation it deems appropriate, and warrants that the borrower is legally present in the country.

    Sources 17 · B2-2-02, Non–U.S. Citizen Borrower Eligibility Requirements (07/28/2015): 'mortgages made to non–U.S. citizens who are lawful permanent or non-permanent residents of the United States under the same terms that are available to U.S. citizens'; 'Fannie Mae does not specify the precise documentation the lender must obtain'; 'using documentation it deems appropriate'; 'the lender represents and warrants that the non–U.S. citizen borrower is legally present in this country' · Checked October 17, 2026

18. According to Fannie Mae's Selling Guide, each borrower must have a valid Social Security number or an ITIN, in addition to meeting legal residency and documentation requirements; and each borrower must sign the security instrument and the note and take title.

    Sources 18 · B2-2-01, General Borrower Eligibility Requirements (09/03/2025), 'Tax Identification Numbers': 'requires that each borrower have a valid Social Security number or Individual Taxpayer Identification Number (ITIN), in addition to meeting existing legal residency and documentation requirements'; 'Establishing Borrower Ownership Interest': 'signing the security instrument'; 'taking title to the property in the name of the individual borrower(s)' · Checked October 17, 2026

19. According to the CFPB, many states, local governments and nonprofits offer programs to make homeownership more affordable, many focused on low- and moderate-income families buying their first home, and many offer down payment assistance that can be used with a regular FHA or conventional loan.

    Sources 19 · Special loan programs, 'State and local programs': 'Many states, local governments, and nonprofits offer programs to make homeownership more affordable'; 'Many of these programs focus on low- and moderate-income families buying their first home'; 'Many programs offer down payment assistance that can be used with a regular FHA or conventional loan' · Checked October 17, 2026

20. According to the CFPB, the Loan Estimate is a three-page form you receive after applying for a mortgage; the lender must provide it within three business days of receiving your application; all lenders use the same standard form, which makes comparing easier; and receiving one does not mean the loan is approved.

    Sources 20 · What is a Loan Estimate? (last reviewed Aug. 9, 2024): 'a three-page form that you receive after applying for a mortgage'; 'within three business days of receiving your application'; 'All lenders are required to use the same standard Loan Estimate form'; 'the lender has not yet approved or denied your loan application' · Checked October 17, 2026

21. According to the CFPB, HUD-approved housing counselors advise on buying a home, renting, defaults and credit, and can offer independent advice about whether a particular set of mortgage loan terms fits your objectives, often at little or no cost.

    Sources 21 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'whether a particular set of mortgage loan terms is a good fit based on your objectives'; 'often at little or no cost to you' · Checked October 17, 2026