A conventional loan is a mortgage not insured by a government agency (FHA, VA, USDA) and conforming to the limits set by Fannie Mae and Freddie Mac. For most California buyers with 620+ credit, conventional is the lowest-cost path to homeownership.
How does a Conventional Loan work?
| Loan limits | $832,750 in standard counties; up to $1,249,125 in high-cost California counties including LA, Orange, SF, Santa Clara, and Alameda. |
| Down payment | As low as 3% for first-time homebuyers (HomeReady, Home Possible); 5% for repeat buyers; 20% to avoid PMI. |
| Credit score | Minimum 620 FICO. Borrowers with 740+ qualify for the best pricing tiers. |
| DTI ratio | Up to 50% with strong compensating factors; 45% is the standard ceiling. |
| PMI | Required when down payment is below 20%. Automatically drops off at 78% LTV. |
| Property types | Primary residence, second home, or investment property — 1–4 unit residential. |
Conventional loan requirements in California (2026)
To qualify for a conventional loan in California, you generally need to meet these core requirements:
- Credit score: 620 minimum, though 740+ earns the lowest interest rates and mortgage-insurance costs.
- Down payment: 3% to 5% — as low as 3% for first-time buyers through HomeReady and Home Possible, and 5% for repeat buyers.
- Private mortgage insurance (PMI): required only when you put down less than 20%. Unlike FHA's MIP, conventional PMI drops off once you reach 20% equity, so it is never a permanent cost.
- Debt-to-income (DTI) ratio: typically up to 45%, and as high as 50% with strong compensating factors such as cash reserves or a high credit score.
- Loan amount: up to the 2026 conforming limit of $832,750 in most California counties, or up to $1,249,125 in high-cost coastal counties.
- Employment: generally two years of documented, steady income.
Meet these and a conventional loan is usually the lowest-cost route to a California home. See which requirements you already meet with a free 60-second pre-qualification.
Who should consider this loan?
- Buyers with 620+ credit and steady W-2 income.
- First-time California homebuyers using HomeReady or Home Possible 3% down programs.
- Move-up buyers with equity from a current home.
- Borrowers refinancing out of FHA to eliminate mortgage insurance.
- Investors purchasing 1–4 unit properties with 15% or more down.
Save Financial advantage
As a direct California mortgage lender shopping across 40+ wholesale and correspondent investors, we match your conventional loan file to the program with the sharpest pricing and most flexible guidelines — not just the one our bank happens to sell.
How does a Conventional compare to FHA and Jumbo?
| Conventional | FHA | Jumbo | |
|---|---|---|---|
| Min credit score | 620 | 580 | 700+ |
| Min down payment | 3% | 3.5% | 10–20% |
| Loan limit (CA) | $832,750 / $1.2M | Same as conventional | $5M+ |
| Mortgage insurance | Required <20% down (drops at 78% LTV) | Required for life of loan* | None typically |
| Funding fee | None | 1.75% UFMIP | None |
| Property types | 1–4 unit, all occupancy | Primary residence only | Primary, 2nd, investor |
For a full side-by-side breakdown of rates, mortgage insurance, and credit rules, read our FHA vs conventional loan comparison for California (2026).
How to qualify for a Conventional Loan in California
Check your credit and down payment
Conventional needs about 620+ credit; you can put as little as 3% down (first-time) or 5%+, with PMI removable at 20% equity.
Get pre-approved
We verify income, assets, and credit and issue a pre-approval so you know your budget and can make strong offers.
Find your home and lock your rate
Once you’re in contract we lock your rate and order the appraisal.
Underwriting and closing
A final review of your file, then you sign and close — conventional loans often close in about three weeks.
Common questions about Conventional Loans
What credit score do I need for a conventional loan in California?
The minimum credit score for a conventional loan is 620. However, borrowers with scores of 740 or higher qualify for the best interest rates and lowest mortgage insurance premiums. According to Fannie Mae loan-level price adjustments, the difference between a 680 and 760 FICO can be 0.5–0.75% in rate.
Can I get a conventional loan with 3% down in California?
Yes. Fannie Mae's HomeReady and Freddie Mac's Home Possible programs allow 3% down for first-time California homebuyers with qualifying income at or below 80% of area median income. Save Financial originates both programs and can help you confirm eligibility.
How much is PMI on a California conventional loan?
Private Mortgage Insurance on a conventional loan typically costs 0.3% to 1.5% of the loan amount annually, paid monthly. The exact rate depends on credit score, down payment, and loan-to-value. PMI automatically terminates when your LTV reaches 78% based on the original purchase price.
What is the 2026 conforming loan limit in California?
The 2026 baseline conforming loan limit is $832,750 in most California counties. High-cost counties (Los Angeles, Orange, San Francisco, San Mateo, Santa Clara, Alameda, Marin, Contra Costa, Napa, San Benito, San Diego, Santa Cruz, Sonoma, Ventura, and Yolo) carry a high-balance limit of $1,249,125. Loans exceeding the applicable limit are classified as jumbo loans.
What credit score do I need for a conventional loan in California?
Typically 620 or higher, though 680+ unlocks the best rates. We’ll review your credit and show exactly how it affects your rate.
Can I avoid PMI on a conventional loan?
Yes — put 20% down to skip PMI entirely, or start lower and cancel PMI once you reach 20% equity. We’ll model both.
Is a conventional loan better than FHA in California?
If your credit is strong, conventional often wins because you can drop PMI; FHA suits lower credit or down payment. We compare total cost side by side.
What are the requirements for a conventional loan?
A conventional loan requires a 620+ credit score, a 3–5% down payment (3% for first-time buyers), a debt-to-income ratio up to about 45–50%, and roughly two years of steady employment. PMI applies below 20% down but cancels at 20% equity.
What are the benefits of a conventional loan?
Benefits of a conventional loan include cancellable PMI (unlike permanent FHA mortgage insurance), no upfront funding fee, down payments as low as 3%, and financing for primary homes, second homes, and investment properties — the lowest long-term cost for borrowers with strong credit.
Is a conventional loan better than FHA?
For borrowers with 620+ credit, a conventional loan is often better than FHA because its PMI cancels at 20% equity while FHA mortgage insurance usually lasts the life of the loan. See our FHA vs conventional comparison for the full cost breakdown.
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