15 Apr 2026 3 min read Conventional Loans

Conventional Loan Guide: What Actually Matters in 2026

Conventional loans are the default for a reason. They work for more borrowers than people realize, they're often cheaper than the alternatives, and with recent changes from Fannie Mae and Freddie Mac, the credit score requirements are much more flexible than they used to be.

I'm Tyler Huntington at West Capital Lending. Here's what you actually need to know about conventional loans in 2026.

Who Conventional Loans Are For

The short answer: almost everyone. Conventional is the first option I look at for every borrower, not just the ones with perfect credit.

Fannie Mae and Freddie Mac removed their minimum credit score requirements earlier this year. That changed the picture significantly. I've gotten conventional loans done with borrowers with FICOs as low as 485. The terms won't be the same as a borrower at 780, but the door is open in ways it wasn't before. If someone told you conventional wasn't an option for you based on credit alone, it's worth a second look.

Down Payment: 3%, 5%, or 20%

The options are real, and each one changes the math differently.

I just closed a loan for a first-time buyer with 3% down and a 780 credit score. Conventional loan, great interest rate, seller paid all the closing costs, and his mortgage payment ended up $200 cheaper than his rent was. That's what 3% down can look like when the credit is dialed in.

With 5% down, the rate improves. With 20% down, PMI goes away entirely. Where you land depends on what cash you have available and what trade-off makes sense for your situation.

PMI: What It Actually Costs

PMI kicks in any time you put less than 20% down. It goes away once you hit 20% equity, which depending on your down payment could take anywhere from one year to seven or eight years.

PMI is not the deal-killer people think it is. On that $400,000 loan I mentioned, PMI was $100 a month. That's it. If your credit score is in good shape, the PMI cost is modest, and it's temporary.

What actually moves the PMI number is your credit score. Rates and PMI both adjust in 20-point FICO bands. The higher your score, the less you pay. 780 is top tier. Every 20 points lower costs you something, both in rate and in monthly PMI.

The Credit Score Conversation

This is the most important thing I tell first-time buyers: get your credit score into the best shape possible before you start looking at homes. Not after you find a house you love. Before.

The difference between a 660 and a 700 FICO isn't cosmetic. It can cost you tens of thousands of dollars over the life of a loan through higher rates, higher PMI, and less favorable terms. A few months of credit work before you start shopping can change the outcome dramatically.

780 is the sweet spot that unlocks the best pricing. But any improvement matters.

Conventional vs FHA: The Real Answer

If your credit score is above 700, conventional beats FHA 99% of the time. That's not an exaggeration.

FHA is an expensive loan once you look at the full cost. There's an upfront mortgage insurance premium that conventional doesn't have, and while the mortgage insurance doesn't last forever, the upfront cost adds up. Conventional has PMI too, but without the upfront hit, and with better pricing for borrowers above that 700 threshold.

FHA exists for a reason and makes sense for specific situations. But if you're coming in with decent credit and you've been told FHA is your only option, ask again.

Let's Figure Out Your Best Path

Whether you're a first-time buyer or you've been through this before, the right loan depends on your specific credit, income, and cash picture. Let's run the numbers and see where you land.

Text Tyler: 949 998 5403