What Is a Conventional Loan?
A conventional loan is any mortgage that is not backed by a government agency (FHA, VA, or USDA). Instead, conventional loans are originated by private lenders and typically sold to Fannie Mae or Freddie Mac — the government-sponsored enterprises that provide liquidity to the mortgage market. Because they're not government-insured, conventional loans have stricter qualification requirements but also offer more flexibility in terms of property types, loan amounts, and use cases.
Conventional loans are the most common mortgage type in Oregon, accounting for the majority of home purchases. For buyers with good credit (620+) and at least 3–5% down, conventional loans often provide the lowest total cost of borrowing — particularly because PMI can be cancelled once you reach 20% equity, unlike FHA mortgage insurance which stays for the life of the loan (if you put less than 10% down).
Conforming vs. Jumbo Conventional Loans
Conforming Loans
Loan amounts at or below the conforming limit ($806,500 in Oregon for 2026). Follow Fannie Mae/Freddie Mac guidelines. Best rates and most flexible terms.
≤ $806,500
Jumbo Loans
Loan amounts above the conforming limit. Require stronger credit (usually 700+), larger down payments (10–20%), and more reserves. Common in Ashland and Jacksonville.
> $806,500
Key Benefits of Conventional Loans
Cancellable PMI
Unlike FHA MIP, conventional PMI can be cancelled once you reach 20% equity — saving you money long-term.
Investment Properties
Conventional loans can be used for second homes and investment properties — FHA, VA, and USDA cannot.
Higher Loan Limits
Conforming limit of $806,500 is higher than FHA's $524,225 in most Oregon counties.
No Upfront MIP
No upfront mortgage insurance premium like FHA's 1.75%. Your loan balance starts lower.
Flexible Property Types
Condos, manufactured homes, multi-unit properties, and unique property types are more easily financed.
Faster Closing
Conventional loans typically close faster than FHA or VA loans due to fewer government requirements.
Conventional Loan Qualification Requirements
| Requirement | Standard | HomeReady/Home Possible |
|---|---|---|
| Min Credit Score | 620 | 620 |
| Min Down Payment | 5% (repeat buyers) | 3% (first-time buyers) |
| Max DTI | 45–50% | 45–50% |
| PMI Required | If <20% down | Reduced PMI rates |
| Income Limits | None | 80% of area median income |
| Homebuyer Education | Not required | Required |
PMI — Private Mortgage Insurance
PMI is required on conventional loans when your down payment is less than 20%. It protects the lender if you default, but it's an additional cost for you. The good news: PMI on conventional loans is cancellable, unlike FHA MIP.
Typical PMI Cost
0.5%–1.5%/yr
Of loan balance, paid monthly. On $350K loan: ~$145–$437/month
Request Cancellation
At 80% LTV
When loan balance reaches 80% of original purchase price
Auto Cancellation
At 78% LTV
Lenders must automatically cancel PMI by law at this point
Conventional vs. FHA — Which Is Right for You?
| Factor | Conventional | FHA |
|---|---|---|
| Min Credit Score | 620 | 580 |
| Min Down Payment | 3–5% | 3.5% |
| Mortgage Insurance | PMI (cancellable at 20%) | MIP (life of loan if <10% down) |
| Upfront MIP | None | 1.75% of loan amount |
| Loan Limit (Jackson Co.) | $806,500 | $524,225 |
| Investment Properties | Yes | No |
| Best Credit Range | 620+ | 500–619 |
| Long-Term Cost | Lower (PMI cancellable) | Higher (MIP stays longer) |
Conventional Loan FAQ
Related Resources
Stephen Harris, CMC | NMLS #203065 | X2 Mortgage, LLC | NMLS #2234467 | Licensed in Oregon, Arizona, and California | Equal Housing Lender. Not a commitment to lend. All loans subject to credit approval.