Conventional Loan Products

How much do you actually need to put down?

Most people believe conventional loans require 20% down. They do not.

3% down is available, but through two different doors. The standard 97% loan requires at least one borrower on the loan to be a first-time buyer. HomeReady and Home Possible also go to 3% and have no first-time-buyer requirement, but they cap household income at 80% of the area median. If you are a repeat buyer under that income limit, 3% is open to you.

5% down is the fallback when neither door fits, and it is still well short of 20%.

Putting less than 20% down means mortgage insurance, which is covered further down. It does not mean a worse loan.

Credit scores: the number that actually matters

The minimum credit score for a conventional loan is 620.

Pricing improves in tiers as your score climbs, at 640, 660, 680, 700, 720, 740 and 760, with the best pricing at 780 and above. That top tier moved to 780 when the pricing grid was restructured in 2023.

If you are sitting just below a tier, it is worth a conversation before you apply. Sometimes a small, targeted change moves you up one.

Low down payment programs

HomeReady (Fannie Mae) and Home Possible (Freddie Mac) are the two workhorses. Both allow 3% down, both reduce the mortgage insurance compared with a standard low-down conventional loan, and both cap income at 80% of the area median for your county. Gift funds are allowed for the down payment.

HomeOne (Freddie Mac) also allows 3% down with no income limit at all, but at least one borrower must be a first-time buyer.

Which of these fits depends on your income, the county, and whether anyone on the loan is a first-time buyer. I run all three when the numbers are close, because the mortgage insurance difference alone can be worth real money every month.

Mortgage insurance, and how you get rid of it

Less than 20% down means private mortgage insurance. There are three ways to structure it.

Monthly is the default and the most common.

Single premium is paid once at closing, either in cash or financed into the loan, and it eliminates the monthly payment entirely. Seller contributions can sometimes cover it, which is worth asking about when you are negotiating.

Lender paid builds the cost into the interest rate instead of a separate line item.

Getting rid of PMI is where most of the confusion lives, so here is how it actually works. You can request cancellation once your balance reaches 80% of the home's original value, meaning the lower of the purchase price or the original appraisal, with a written request, a good payment history, and no second liens. It comes off automatically at 78% of that same original value. Appreciation plays no part in either of those.

Appreciation is a separate request, based on the home's current value. Fannie Mae allows it on a one-unit primary residence at 75% loan to value if the loan is two to five years old, or 80% if it is more than five years old. The servicer orders a new valuation. If your home has gained value, that math is worth running.

Already have a Fannie or Freddie loan? There may be a refinance for you

RefiNow (Fannie Mae) and Refi Possible (Freddie Mac) exist for homeowners whose income is at or below 100% of the area median. Both require that the refinance reduce your monthly payment, with an interest rate reduction of at least half a percentage point. Both go to 97% loan to value on a 30-year fixed, accept scores from 620, and include a $500 credit from the agency if an appraisal is required.

The catch is that your existing loan has to be owned by the right agency. I can look that up for you in a couple of minutes.

Adjustable rate options

Conventional ARMs come in 5, 7 and 10 year fixed periods before the first adjustment. They are not right for most buyers, but they can be a genuinely good fit if you have a clear reason to expect a sale or refinance inside that window. I will tell you honestly when the fixed rate is the better call.

Condos

Many condo purchases qualify for a limited review, which skips the full condo project questionnaire and shortens the approval. Whether a specific building qualifies depends on the project and the loan, so it is worth checking early rather than late.

Investment properties and second homes

Conventional financing covers second homes and investment property. How much you can borrow against the value depends on the property type and on what you are doing.

One-unit investment property

• Purchase: up to 85% of value
• Rate-and-term refinance: up to 75% of value

Two to four unit investment property

• Purchase and rate-and-term refinance: up to 75% of value

If you are looking at a cash-out refinance on an investment property, the limits work differently again. Let us talk through your specific scenario rather than guess at it.

Loan limits in Indiana

The 2026 conventional conforming loan limit is $832,750 for a one-unit home, set each year by the Federal Housing Finance Agency.

Indiana has no high-cost counties, so that same limit applies in all 92. Above it you are in jumbo territory, which is a different conversation and one I am happy to have.

Figures reviewed September 2026. Loan limits reset each January and program guidelines change. Confirm current figures before relying on them.

This is general information about how conventional loans work, not a determination that you qualify or that any particular loan suits your situation. Eligibility and loan terms depend on your qualifications, the property, current program requirements, underwriting approval, and lender guidelines.

Frequently Asked Questions About Conventional Loans

What is a conventional loan and how does it differ from an FHA loan?

A conventional loan is a mortgage that isn't insured or guaranteed by a government agency. It follows Fannie Mae or Freddie Mac guidelines instead. For most conventional financing you'll need a representative credit score of at least 620.

The difference that matters most over the life of the loan is mortgage insurance. Conventional PMI comes off. You can request cancellation once the balance reaches 80% of the home's original value, and the servicer must terminate it automatically at 78%. FHA mortgage insurance mostly doesn't. On an FHA loan with a term longer than 15 years and less than 10% down, the annual premium runs for the full mortgage term; with 10% or more down it runs 11 years.

That one difference is why a lot of Indiana buyers start with FHA and refinance into conventional once they have the equity and the credit profile to do it.

What is the minimum down payment for a conventional loan in Indiana?

Three percent, but there are two routes to it, and they have different rules.

• Standard 97% financing requires at least one borrower on the loan to be a first-time buyer.
• HomeReady has no first-time buyer requirement, but qualifying income must be at or below 80% of the area median income for the property's location. A repeat buyer under that limit can still put 3% down.

If neither fits, plan on 5%. Twenty percent avoids PMI from the start, which is a separate question from whether you can afford to wait for it to come off later.

Which route applies to you depends on your income, the county, and whether you've owned a home in the last three years. Worth a conversation before you assume you need 5%.

What credit score do I need for a conventional loan?

620 is the minimum representative credit score for standard conventional financing. But the minimum and good pricing are a long way apart.

Pricing steps in bands (640, 660, 680, 700, 720, 740, 760) with the best tier at 780 and above. Every band you move up lowers your cost, and moving from the high 600s into the 700s is usually the single biggest lever a borrower has.

If you're sitting near a boundary, find out before you lock. A small change can move you a full band, and that's worth real money over thirty years.

Can I get a conventional loan for an investment property in Indiana?

Yes. For a single-unit investment property, conventional financing goes to 85% loan-to-value on a purchase, which is 15% down, and 75% on a rate-and-term refinance. For a two- to four-unit investment property the limit is 75% for both a purchase and a rate-and-term refinance, so 25% down.

Investment property pricing runs higher than owner-occupied, and you'll qualify using your own income and debts. If the numbers are tight, a DSCR loan qualifies on the property's rental income instead of yours, worth comparing before you assume conventional is the answer.

What is PMI and when can it be removed on a conventional loan?

PMI protects the lender, not you, and it's required on conventional loans when you put down less than 20%. It comes off two different ways, and people mix them up constantly.

Based on the original value. That's the lower of your purchase price or the appraisal from when you bought. You can request cancellation in writing once the balance reaches 80% of that figure, provided you're current, have a good payment history, have no second mortgage on the property, and can show the value hasn't declined. The servicer must cancel automatically at 78% of that same original value, and again at the midpoint of your amortization schedule if it hasn't come off before then. These are your rights under federal law.

Based on today's value. This is the appreciation route, and it's a separate request with its own thresholds. On a one-unit primary residence or second home, termination is available at 75% loan-to-value if the loan is between two and five years old, or 80% if it's more than five years old. On an investment property (or a two- to four-unit you live in) it's 70%, and the loan must be more than two years old. The servicer orders a new interior and exterior valuation.

The short version: appreciation can get PMI off, but not through the automatic federal cancellation. That one always uses your original value. If your Indiana home has appreciated meaningfully since you bought it, ask your servicer specifically about a value-based termination, because it isn't something they'll offer you.

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