Casa Academy

Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.

Conventional Loan

A conventional loan is a mortgage not insured by the FHA or guaranteed by the VA or USDA, typically conforming to Fannie Mae or Freddie Mac standards with private mortgage insurance when the down payment is below 20%.

Exam context

Select conventional when the question excludes government backing. Compare down payment, mortgage insurance, and property condition standards against FHA and VA products.

Private market underwriting

Conventional loans follow lender and investor guidelines for credit score, debt-to-income ratio, reserves, and property type. Conforming loans stay within annual dollar limits set by the FHFA; jumbo loans exceed those limits and carry stricter requirements.

Insurance and down payment

Borrowers with less than 20% equity usually pay private mortgage insurance until they reach 78% loan-to-value by scheduled amortization or request removal at 80% with an appraisal. This differs from FHA mortgage insurance premiums that often last for the life of the loan in recent programs.

Examples

  • Conforming purchase

    A buyer puts 15% down on a primary residence and obtains a 30-year fixed conventional loan with PMI until equity reaches the cancellation threshold.

  • Jumbo second home

    An investor buys a luxury condo above the conforming limit and finances with a jumbo conventional note at higher rates and larger reserve requirements.

Keep studying

Practice conventional loan questionsEnroll in pre-licensing

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