Q: What is a Conventional Home Loan?

A: A conventional home loan is a mortgage offered by private lenders, not insured by government programs like FHA, VA, or USDA. It’s the most common type of loan in Washington State and nationwide, known for its flexible down payment options, wide property eligibility, and the ability to remove private mortgage insurance (PMI) once you build enough equity.

About Conventional Home Loans

Conventional home loans are the most widely used mortgages in the United States. They are offered by private lenders and typically follow standards set by Fannie Mae and Freddie Mac. For many Washington State buyers—from Seattle and Bellevue to Tacoma, Spokane, Vancouver, and Bellingham—conventional financing provides a flexible path to homeownership with options that fit a wide range of budgets and property types.

This guide explains what a conventional loan is, how it differs from government-backed loans, and when it makes sense to choose conventional financing. You’ll also find links to detailed down payment options so you can compare 3%–5%, 10%, 15%, and 20% paths side by side.

What Is a Conventional Loan?

A conventional loan is a mortgage that is not insured by a government agency such as the FHA, VA, or USDA. Most conventional loans are “conforming,” meaning they meet standard guidelines for income, credit, and documentation. Lenders also offer some “non-conforming” conventional loans for unique scenarios.

Because these loans are privately underwritten, they come with a variety of terms and features—fixed or adjustable rates, multiple down payment choices, and options for different property types (subject to program rules).

Conventional vs. FHA, VA, and USDA

FHA — Designed for accessibility with flexible credit and low down payment, but requires mortgage insurance for longer periods. Learn more: About FHA Home Loans
VA — For eligible service members, veterans, and some spouses; no down payment and no monthly PMI. Learn more: VA Home Loans in Washington
USDA — For eligible rural areas and incomes; offers no-down-payment in designated locations.

Buyers who have solid credit and stable income often prefer conventional loans for their PMI flexibility, property options, and long-term cost control.

Key Benefits of Conventional Loans

PMI flexibility — If you put less than 20% down, private mortgage insurance (PMI) is typically required, but it can be removed after reaching sufficient equity and meeting program rules.
Multiple down payment paths — Choose what fits your budget: low down payment or larger equity upfront.
Property variety — Conventional loans can finance single-family homes, many condos, townhomes, and some multi-unit primary residences (guidelines apply).
Competitive in offers — Conventional pre-approvals are widely recognized and often viewed favorably by sellers.

Considerations to Keep in Mind

Credit and documentation — Conventional loans generally expect well-documented income and a qualifying credit profile.
PMI cost when under 20% — PMI adds to your monthly cost until you reach the equity milestone for removal.
Condo and property rules — Some buildings or property types have specific eligibility requirements.

A strong pre-approval will clarify exactly how these factors apply to your situation.

Down Payment Options (Compare Your Path)

Conventional loans are flexible on down payment—choose the route that best balances your monthly comfort and savings plan:

Low Down Payment (3%–5%) — Fastest path to buying; PMI applies and can be removed later.
10% Down — Lower PMI than 3%–5%, stronger offer presence.
15% Down — Reduced payment and PMI; closer to eliminating PMI.
20% Down — No PMI, lowest monthly payment, strongest equity day one.

Fixed-Rate vs. Adjustable-Rate (ARM)

Fixed-rate loans keep the same principal-and-interest payment for the entire term, which many buyers prefer for predictability. Adjustable-rate (ARM) loans start with a fixed period and then adjust at set intervals. ARMs can fit certain timelines or budget strategies; fixed loans favor long-term stability.

Eligible Property Types

Primary residences — Most common use; broadest eligibility.
Second homes — Vacation or seasonal use; additional guidelines apply.
Investment properties — Allowed under many conventional programs with specific requirements.
Condos and townhomes — Building and HOA rules may affect eligibility.
Multi-unit primary residences — Some programs allow 2–4 unit properties for owner-occupants (rules apply).

Who Is a Good Fit for a Conventional Loan?

Conventional loans typically suit buyers who have stable income, documented employment, and a credit profile that meets program standards. They also work well for move-up buyers, second-home purchasers, and many investors who want PMI flexibility, fixed or ARM choices, and wide property eligibility.

The Conventional Loan Process

Get Pre-Approved — Document income, assets, credit, and debt so you can shop with clarity and confidence.
Choose Your Down Payment Path — Compare monthly comfort, PMI, and equity goals across 3%–5%, 10%, 15%, and 20% options.
Find Your Property — Align neighborhood, commute, and property type with your approval.
Make an Offer — A strong pre-approval helps you compete in Washington’s popular markets.
Appraisal and Underwriting — Verify value and finalize the loan file.
Close — Sign, fund, and get the keys.

Washington State Perspective

Across Washington, conventional loans are common in urban and suburban areas with diverse property types. In the Seattle and Eastside corridors, buyers often weigh down payment size against offer strength and monthly comfort. In places like Tacoma, Vancouver, Spokane, and Bellingham, conventional loans remain popular for their flexibility across condos, townhomes, and single-family homes.

Conventional mortgages offer a versatile toolkit for Washington buyers: flexible down payments, PMI that can be removed, and a wide range of property options. Whether you’re purchasing your first home or your next one, the right conventional strategy can help you balance monthly affordability, equity growth, and long-term plans.

Get Pre-Approved for a Conventional Loan