Conventional loans: requirements and 2026 limits

What makes a loan “conventional”?

A conventional loan is a mortgage that no government agency insures or guarantees. FHA, VA and USDA loans carry that backing; see FHA loans, VA loans and USDA loans. Many conventional loans are “conforming,” meaning they meet the size limit and the rules of Fannie Mae and Freddie Mac (the Enterprises), the two companies that buy mortgages from lenders. A loan above the applicable limit is commonly called a “jumbo” loan; Fannie Mae’s guide makes the lender responsible for keeping each loan within the limit for its area.

What is the 2026 conforming loan limit?

The Federal Housing Finance Agency (FHFA) adjusts the limit every year to reflect the change in average U.S. home prices. For 2026, it announced on November 25, 2025:

The baseline rose $26,250 from 2025, because FHFA’s house price index rose 3.26% between the third quarters of 2024 and 2025. In an area where 115% of the local median home value exceeds the baseline, the limit is higher than the baseline. Federal law sets that limit as a multiple of the area median home value, capped at 150% of the baseline. That cap is the $1,249,125 ceiling. FHFA publishes the limit for every county, so look up the county where the home is located. Loans above the baseline but within the local high-cost limit are called “high-balance” loans in Fannie Mae’s guide, and eligibility and delivery rules can differ for them.

How much down payment does a conventional loan need?

Fannie Mae’s HomeReady loan allows a loan-to-value (LTV) ratio up to 97%, which means a 3% down payment. The requirements for LTVs above 95% are:

• Purchase, or limited cash-out refinance, of a one-unit principal residence.
• A fixed-rate loan with a term up to 30 years. High-balance and adjustable-rate loans are not permitted.
• Underwriting through Fannie Mae’s Desktop Underwriter system only.
• Total qualifying income at or below 80% of the area median income for the property’s location.
• Homeownership education when all occupying borrowers are first-time buyers.

Other conventional loans may require more. Fannie Mae publishes maximum LTV ratios by loan type in an Eligibility Matrix, and lenders can set stricter rules. The full picture is in how much down payment you need.

Gift money can help. Under Fannie Mae’s guide, for a one-unit principal residence the whole down payment can come from a gift, even at an LTV above 80%. The gift needs a signed gift letter and a qualifying donor, such as a relative. A two- to four-unit principal residence above 80% LTV requires 5% from the borrower’s own funds.

What credit score and debt ratio do you need?

For manually underwritten loans, Fannie Mae’s minimum credit score is 620 for fixed-rate loans and 640 for adjustable-rate loans. Loans run through Desktop Underwriter have no required minimum score; the system judges the whole credit file. Lenders can add stricter rules. Fannie Mae’s guide says classic FICO scores are currently required for loans run through Desktop Underwriter and for manually underwritten loans, while it transitions to VantageScore 4.0 and FICO 10T. See credit score and mortgage rates.

For debt-to-income (DTI), the maximum total ratio is 36% for manually underwritten loans, up to 45% with the credit score and reserves in the Eligibility Matrix, and 50% through Desktop Underwriter. See debt-to-income ratio.

Does a conventional loan require mortgage insurance?

Fannie Mae’s mortgage insurance coverage table starts at an LTV of 80.01%, so a down payment under 20% means private mortgage insurance (PMI). The required coverage level rises with LTV, up to 97%. FHA mortgage insurance, by comparison, lasts for the loan term at high LTVs (see FHA loans). For cost and removal, see private mortgage insurance.

A worked example

This is an example, not a quote. Take a $400,000 home bought with 3% down through HomeReady. The down payment is $12,000, and the loan is $388,000. That is below the $832,750 baseline, so it is a conforming loan. A 20% down payment would be $80,000 and a $320,000 loan, with no PMI required by this table. The price of PMI at 3% down depends on your credit score and the insurer, so get quotes on the Loan Estimate.

Where states differ

The conforming limit, Fannie Mae’s rules and the credit and DTI standards are national. State law changes what surrounds the loan: transfer taxes, recording fees, who pays title insurance, attorney involvement, and state first-time buyer programs that can stack with a conventional loan. For state costs, see closing costs in Texas and closing costs in California. For state programs, see Texas and California first-time buyer programs.