Conventional Loan Pros and Cons (2026)

Finding the right mortgage can feel overwhelming, but it’s a big part of the homebuying process. Conventional loans are one of the most common options out there. They come with some great perks — and a few drawbacks too.

Since they’re not backed by the government like FHA loans, the rules are a little different. You usually need a higher credit score, but the trade-off can be better interest rates and more loan flexibility.

You can use a conventional loan for your main home, a second home, or even a rental property. That kind of flexibility makes them super appealing for a lot of buyers.

In this guide, we’ll walk through the highlights, pros, and cons so you can figure out if a conventional loan is the right move for you.

What Is a Conventional Loan?

A conventional loan is just a regular mortgage that isn’t backed by any government agency, like the FHA or VA. These loans come from private lenders, and they set their own rules based on your financial picture.

Most of the time, you’ll need a credit score of at least 620 to qualify. The better your credit and income, the more likely you are to get approved with great terms.

Here’s what makes a conventional loan stand out:

• No government insurance involved

• Higher credit score usually needed

• Can be used for lots of property types

You can use one to buy your main home, a vacation spot, or even an investment property. That’s a big plus if you’re looking for options.

Conventional Loan Highlights

Conventional loans come with features that make them a great fit for many buyers. If your credit is strong, you might get a lower interest rate — which can save you a lot over time.

You also get the option to pick between fixed-rate and adjustable-rate terms. That means you can set things up based on your budget and comfort level.

And since these loans aren’t government-backed, you’re not dealing with as many restrictions on things like loan amounts.

Here’s a quick list of the highlights:

• Lower interest rates if your credit is good

• Flexible loan terms — fixed or adjustable

• Can borrow up to the conforming loan limit

• PMI can be removed once you hit 20% equity

These features can give you more control and help keep your costs down in the long run.

Pros of Conventional Loans

There are plenty of upsides to choosing a conventional loan — especially if your finances are in good shape.

One big advantage is the potential for lower overall borrowing costs. If your credit score is high, you’ll likely qualify for better interest rates and loan terms.

These loans are also super flexible when it comes to property types. You can buy a house, condo, or even a multi-unit building.

And unlike FHA loans, you don’t have to pay upfront mortgage insurance. If you put down at least 20%, you skip PMI completely. Even if you put down less, you can cancel PMI later when you reach 20% equity.

Here’s a breakdown of the main benefits:

• Lower interest rates if you have strong credit

• No upfront mortgage insurance fees

• PMI goes away once you reach 20% equity

• Can be used for primary homes, second homes, or rentals

• Easier and faster approval process

• Option to choose between fixed or adjustable-rate loans

• Fewer government rules to deal with

If you’re financially prepared, a conventional loan can be a smart and flexible option.

Cons of Conventional Loans

Conventional loans aren’t for everyone. They can be tougher to qualify for, especially if your credit isn’t great or you don’t have much saved up.

You’ll usually need a credit score of at least 620, and while you might be able to put down as little as 3%, many buyers end up putting down more to avoid PMI.

If you put down less than 20%, you’ll have to pay PMI each month until you build enough equity. That can add to your monthly payment for a while.

Here are some of the downsides to think about:

• Higher credit score needed (620 or above)

• Bigger down payments often required

• PMI is required if you put down less than 20%

• May come with higher upfront costs

• Stricter income and financial checks

While the property standards are more relaxed than FHA loans, that also means you’ll want to be careful about the condition of the home you’re buying.

Conventional Loan vs. FHA Loan: Key Differences

Conventional and FHA loans work differently, and understanding the key differences can help you decide which one fits your situation better.

Conventional loans are a bit stricter, but they reward strong credit and bigger down payments. FHA loans are more forgiving if your credit score is lower or if you don’t have much saved.

FHA loans also require mortgage insurance for the life of the loan if you put down less than 10%, while conventional loans only need PMI if your down payment is under 20% — and you can cancel it later.

Factors	Conventional Loan	FHA Loan
Credit Score	620+	580+
Down Payment	As low as 3%	3.5% minimum
Mortgage Insurance	PMI if under 20%, removable	Required for most loans
Property Use	Primary, second, or investment	Primary residences only

Conventional loans are great if your credit and savings are strong. FHA loans work better if you need a little help qualifying.

Who Should Consider a Conventional Loan?

Conventional loans are a solid option for buyers with strong credit and reliable income. If you can put down 20%, you’ll save money by avoiding mortgage insurance — and you’ll likely get a better interest rate.

They’re also ideal if you want to buy a second home or a rental property, since FHA loans don’t allow that.

You might want to look into a conventional loan if you:

• Have a credit score of 620 or higher

• Can afford a 20% down payment

• Want to avoid long-term mortgage insurance

• Need more options for property types

• Prefer more flexibility in loan terms

If those boxes check out for you, conventional loans can offer long-term savings and more freedom in how you finance your home.

Is a Conventional Loan Right for You?

At the end of the day, it all comes down to your financial situation and goals.

If you have good credit, steady income, and enough saved for a solid down payment, a conventional loan could be a great fit.

You’ll get more options, fewer fees over time, and the potential for lower monthly payments — as long as you meet the requirements.

Not sure what’s best for you? A quick conversation with a mortgage advisor can help you figure it out and point you in the right direction.

Give us a call at 813-343-4775 or schedule a consultation for us and we'll call you!