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 | $806,500 in standard counties; up to $1,209,750 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. |
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) | $806,500 / $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 |
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 $806,500 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 $1,209,750. Loans exceeding the applicable limit are classified as jumbo loans.
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