The Most Popular Mortgage in America — For Good Reason

A conventional loan is a mortgage not backed by any government agency. It follows guidelines set by Fannie Mae and Freddie Mac and is issued entirely by private lenders. Because there's no government guarantee, lenders require stronger credit than FHA loans — but in return, conventional loans offer more property flexibility, no upfront mortgage insurance, and PMI that eventually cancels. FHA loans are government-insured, accept lower credit scores, but carry mortgage insurance for the life of the loan in most cases.

The minimum credit score for a conventional loan is 620. However, the score you qualify with and the score that gets you the best rate are very different numbers. Borrowers with scores of 700–720 see noticeably better rates, and scores above 740 typically unlock the best conventional pricing available. If your score is between 620 and 680, it's worth having a conversation about whether FHA might actually cost you less overall once rates and mortgage insurance are factored in.

First-time homebuyers can put as little as 3% down through programs like Fannie Mae's HomeReady or Freddie Mac's Home Possible. Repeat buyers typically need a minimum of 5%. Putting down 10–15% reduces your PMI cost. Putting down 20% eliminates PMI entirely. For second homes, the minimum is usually 10%; for investment properties, 15–25% depending on the number of units.

Under the Homeowners Protection Act, PMI on a conventional loan is automatically canceled when your loan balance reaches 80% of the original purchase price (based on your scheduled payments). You can also request cancellation once you reach 80% equity — either through payments or because your home's value has increased. If your home has appreciated significantly, a new appraisal can establish the higher value and trigger early PMI removal. This is one of the biggest financial advantages conventional loans have over FHA.

For 2025, the conforming loan limit in Shasta County is $806,500 for a single-family home. This is the maximum amount a conventional loan can be and still be purchased by Fannie Mae or Freddie Mac. Loans above this limit are considered jumbo loans and come with different qualification requirements. The 2025 conventional limit is $282,275 higher than the FHA limit in Shasta County, making conventional the only option for many mid-to-upper range purchases in the Redding market.

Yes — and this is one of the most important differences between conventional and FHA. Conventional loans are available for primary residences, second homes, and 1–4 unit investment properties. FHA is limited to primary residences only. For investment properties, expect to put 15–25% down, have a credit score of 680 or higher, and show 6 months of reserves. Second homes typically require at least 10% down. I work with investors throughout Shasta County — give me a call and we'll run the numbers for your specific scenario.

The right answer depends entirely on your credit score, down payment, and debt load. As a general rule: if your credit score is above 680 and you have at least 5% to put down, conventional is usually the better long-term choice because PMI eventually goes away. If your score is below 680 or your debt-to-income is above 45%, FHA may be more accessible and sometimes even cheaper in the short term. The best approach is to run both scenarios with actual numbers — which is exactly what we do on our first call.

Yes, with waiting periods. For conventional loans: Chapter 7 bankruptcy requires a 4-year wait from discharge. Chapter 13 requires 2 years from discharge or 4 years from dismissal. A foreclosure requires a 7-year wait in most cases, though extenuating circumstances may reduce this to 3 years. These waiting periods are longer than FHA's, which is one reason buyers with recent credit events often start with FHA and refinance into conventional later once the waiting period has passed and their credit has recovered.