What Is a Conventional Loan?

A conventional loan is a mortgage that is not insured or guaranteed by a federal government agency such as the FHA, VA or USDA.

Many conventional mortgages are conforming loans, meaning they meet applicable requirements established for mortgages purchased by Fannie Mae or Freddie Mac.

Conventional loans may offer:

• Low-down-payment options for eligible borrowers

• Fixed-rate and adjustable-rate options

• Financing for primary residences, second homes and investment properties

• Private mortgage insurance that may eventually be removed

• Competitive financing for qualified borrowers

2026 Conventional Loan Limits in Folsom and Sacramento County

Folsom is located in Sacramento County. The 2026 conforming loan limits are:

1-unit: $832,7502

2-unit: $1,066,2503

3-unit: $1,288,8004

4-unit: $1,601,750

If your required loan amount exceeds the applicable conforming limit, a Jumbo Mortgage may be worth considering.

How Much Down Payment Do You Need?

You do not necessarily need 20% down for a conventional mortgage.

Certain programs may allow eligible borrowers to purchase with:

• As little as 3% down under qualifying programs

• 5% or more down in many conventional scenarios

• Larger down payments when appropriate for the property or borrower

Putting 20% down can eliminate borrower-paid PMI in many cases, but it is not a universal requirement.

Eligibility depends on factors such as occupancy, property type, loan amount, income and underwriting findings.

What Credit Score Is Needed for a Conventional Loan?

There is not one universal credit-score requirement for every conventional mortgage.

Conventional underwriting evaluates the overall loan profile, including:

• Credit history

• Debt-to-income ratio

• Down payment and loan-to-value

• Income and employment

• Assets and reserves

• Property type and occupancy

Fannie Mae's Desktop Underwriter no longer applies a universal minimum third-party credit score to eligible DU casefiles. However, individual programs, lenders, mortgage insurers or manually underwritten loans may have separate requirements.

Credit can also affect mortgage pricing and PMI costs.

Conventional Loan Requirements

Typical conventional mortgage underwriting evaluates:

Income: Stable, qualifying income that is reasonably expected to continue.

Debt: Monthly obligations and debt-to-income ratio.

Assets: Funds for the down payment, closing costs and any required reserves.

Credit: Overall credit history and risk profile.

Property: Eligible property type, occupancy, appraisal and title.

Conventional financing may be available for single-family homes, condominiums, planned unit developments, certain manufactured homes and qualifying 2–4 unit properties.

What Is PMI on a Conventional Loan?

Private Mortgage Insurance (PMI) is commonly required when a conventional mortgage has a higher loan-to-value ratio, such as when the borrower puts less than 20% down.

PMI costs vary based on factors including credit, loan-to-value and loan amount.

Unlike some government mortgage insurance, borrower-paid PMI on many conventional loans may eventually be removed.

For qualifying mortgages, borrowers may generally request PMI cancellation when the principal balance is scheduled to reach 80% of the home's original value, subject to applicable requirements. Automatic termination generally occurs at 78% when applicable conditions are satisfied and the loan is current.

Can Conventional Loans Be Used for Second Homes or Investment Properties?

Yes. Depending on the program, conventional financing may be available for:

• Primary residences

• Second homes

• One-unit investment properties

• Certain 2–4 unit investment properties

Second-home and investment-property transactions generally have different down-payment, reserve, pricing and underwriting requirements.

Conventional Loans for Self-Employed Borrowers

Self-employed borrowers can qualify for conventional financing when their income and overall financial profile meet applicable requirements.

Underwriting may review tax returns, business income, profit-and-loss information and other documentation.

If traditional tax-return qualification does not accurately reflect your financial situation, it may also make sense to compare conventional financing with Bank Statement Loans, 1099 Income Loans or Asset Depletion Loans.

Conventional Mortgage Process

1. Review your financing goals
We review your income, credit, debts, assets, down payment and property goals.

2. Get pre-approved
Your financial information is evaluated to determine available loan options and purchasing capacity.

3. Find a home and make an offer
Once you have an accepted purchase agreement, the loan moves into processing.

4. Underwriting and appraisal
The lender reviews the borrower documentation, property, appraisal, title and other required items.

5. Closing
After final approval and completion of closing requirements, you sign the final loan documents.