Conventional Loan Approval: The Standard Lenders Hold You To

A conventional loan is any mortgage not backed by a government agency. Because the lender carries the risk, the standards are the strictest of the common loan types - but the terms are also the best for borrowers who qualify.

Most conventional loans follow Fannie Mae and Freddie Mac guidelines, which set the baseline for credit, income, and down payment requirements.

The minimum score for most conventional loans is 620, but the pricing tiers reward much higher. Borrowers above 740 get the best rates; below 680, costs climb quickly through higher rates and mortgage insurance pricing.

Underwriters read the whole file, not just the score. Recent late payments, high utilization, and collections all weigh against you even when the number qualifies.

The minimum down payment can be as low as 3% for qualifying buyers, but 20% eliminates private mortgage insurance entirely. Between those points, PMI applies - and its cost is driven by your credit score.

Lenders generally want your total monthly debts - including the new mortgage - under 43% of gross income, though strong files can stretch higher.

The levers are the same as always, but the payoff is larger here: lower utilization, clean payment history, and no new credit in the months before you apply.

If your file has negative items, addressing them before you apply can move you into a better pricing tier - on a 30-year loan, that difference compounds into real money.