The Quick Read: A conventional loan for the home you live in follows Fannie Mae or Freddie Mac standards, and occupancy is the switch that sets most of the terms. Live in the home as your primary residence and you get the most generous leverage: 97% loan-to-value (LTV, the loan as a percentage of the home’s value) for a first-time buyer, 95% otherwise. Second homes and rentals get less. Every figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
What Makes a Loan “Conventional”?
A conventional loan is not insured or guaranteed by a government agency. For a primary home, “conventional” in practice means the loan meets Fannie Mae or Freddie Mac standards, so the lender can sell it to one of them.
Conventional payment estimate
The starting figures are an example price at the first-time buyer’s minimum down payment. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a conventional loan quote.
Estimate seeded at the low end of Fannie Mae’s published range (0.58%–1.86% a year); the insurer prices the actual premium on the score and the leverage. Applies only above 80% loan-to-value.
Illustrative starting assumptions: a $350,000 price, the first-time buyer’s minimum down payment, a thirty-year term at the current Freddie Mac benchmark, mortgage insurance at the low end of Fannie Mae’s published range, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a conventional loan quote; your rate is set by the lender at lock. The mortgage insurance figure is an editable estimate seeded from Fannie Mae’s published typical range, not a premium quote; the insurer prices the actual premium, and the cancellation month assumes scheduled payments with no extra principal and no change in value. Taxes, insurance and dues are editable estimates; closing costs are not included. Conforming loan limits apply by county. Licensed in sixteen states for consumer mortgages.
Those standards come with a few basic rules. Under Fannie Mae’s Selling Guide, the home must be residential property with no more than four units. The loan can’t exceed the conforming loan limit. Anything above 80% LTV needs credit enhancement, which almost always means mortgage insurance. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Each lender can add stricter rules of its own. Those are called overlays.
Lendmire’s conventional loan programs page covers what the brokerage arranges. Lendmire is a mortgage broker licensed for consumer lending in 16 states. It places these loans through wholesale lenders and does not lend itself.
Where the Requirements Apply: Occupancy Is the Switch
Occupancy decides the leverage you can use. The agencies recognize exactly three types: principal residence, second home and investment property. Each gets its own limits in the Fannie Mae Eligibility Matrix, which is the table of maximum LTV by occupancy, unit count and loan purpose.
Here is how the maximum purchase leverage lines up across the three.
| Occupancy | Units | Max LTV on a purchase |
|---|---|---|
| Primary, first-time buyer | 1 | 97% |
| Primary, other buyers | 1 | 95% |
| Primary | 2-4 | 95% |
| Second home | 1 | 90% |
| Investment property | 1 | 85% |
| Investment property | 2-4 | 75% |
The second-home and investment rows come from the alternate copy of the matrix. The matrix is a living document, so the numbers can shift. Lender overlays can also lower them.
A rental or a vacation home follows a different path. Occupancy decides the leverage, and this article stays on the home you live in.
What Counts as a Primary Home
Your primary residence is the property you occupy as your main home. When several borrowers are on the loan, only one must occupy the home and take title. Different rules apply to co-signers and guarantors who don’t live there.
Active-duty military borrowers get a break. If service forces a temporary absence, the home still counts as owner-occupied.
Some property types are out. A condo or co-op hotel unit is not residential and is ineligible. A second home has its own tests: it must be a one-unit home, suitable for year-round use, under your exclusive control, and not part of a rental program.
A “first-time buyer” here has a specific meaning. It means at least one borrower has had no ownership interest in a residence in the previous three years. That definition unlocks the 97% option.
The Occupancy Promise, Step by Step
The promise is not a vague intention. It is written into the loan documents. The standard security instrument (the mortgage or deed of trust you sign) asks you to move in within 60 days of signing. You then keep the home as your residence for at least one year after you move in, per Freddie Mac’s Guide.
Some web articles describe this as a loose custom with no paper behind it. It isn’t. It is a covenant in the document you sign.
In practice, the timeline looks like this:
1. Application. You tell the lender the home will be your primary residence.
2. Underwriting. The file is reviewed with that occupancy in mind. Your reasons for choosing this home should make sense for someone living in it.
3. Closing. You sign the occupancy certification and the security instrument.
4. Move-in. You occupy the home within the window the document sets.
5. The first year. You keep it as your residence.
Plans do change. The instrument and the servicer’s process both leave room for exceptions. The lender may agree to something different in writing, or extenuating circumstances beyond your control may apply. A waiver is not automatic, though, so ask before you act.
Misstating your occupancy to get better terms can be treated as mortgage fraud, and it can put the loan at risk. If your plans are uncertain, say so early. Don’t paper over it.
How the Loan Gets Underwritten
Underwriting is the lender’s review of your file. Most conventional files run through Desktop Underwriter, Fannie Mae’s automated system, which returns a finding. Across the wholesale programs Lendmire places files with, the automated finding governs most files.
Here is the order a typical file follows.
Application and disclosures. You apply, and the lender sends a Loan Estimate that lays out the loan’s key terms and costs. Before closing you receive a Closing Disclosure with the final costs. Read both against each other.
Credit. The wholesale conventional programs start at a 620 decision score. An adjustable rate under manual underwriting starts at 640. Some lenders set a higher floor. Your score also affects pricing and mortgage insurance cost, so a higher score helps even when you clear the minimum.
Debt-to-income. Your debt-to-income ratio (DTI) is your total monthly debts divided by your gross monthly income, with the new housing payment included. Per Fannie Mae’s DTI rules, the ceiling on an automated file is 50%. Manually underwritten loans run at 36%, or up to 45% when you meet the reserve and score factors in the Eligibility Matrix.
Manual underwriting is the fallback when the automated system doesn’t return an approval. It is stricter and leans harder on your documents.
Income, assets and reserves. The lender documents your income, your down payment funds and any reserves (savings left over after closing). Rental income from other units in a duplex follows its own rules.
Property review. Most loans need a full appraisal. Some qualify for value acceptance, where Fannie Mae accepts the lender’s value without an appraisal. It applies only to eligible transactions, such as one-unit principal residences. It is not available if a recent appraisal is already on file in Fannie Mae’s data. The lender can also decline the offer and order an appraisal. Many buyers don’t realize value acceptance means no appraisal at all.
Re-check before closing. A new debt that pushes your DTI past the limits can make the loan ineligible. Don’t open a credit card or finance a car between application and closing.
Pricing. Fannie Mae publishes a loan-level price adjustment matrix that adds adjustments based on credit score, loan purpose, occupancy, unit count and product type. They change often. Your Loan Estimate shows what applies to you.
Down Payment, Mortgage Insurance and When It Ends
You do not need 20% down. A first-time buyer can put down 3% on a one-unit primary home with a fixed rate. Other buyers can put down 5%. Two- to four-unit primary homes also reach 95% LTV. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Above 80% LTV, you pay mortgage insurance. Published typical annual premiums run from 0.58% to 1.86% of the loan balance. That is a range, not a quote. Your credit score and down payment drive where you land. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The good news is that conventional mortgage insurance ends. The CFPB explains the rules:
- You can request cancellation at 80% of the original value. You need a good payment history, no junior liens, and no drop in the home’s value.
- The servicer must end it automatically at 78%, if you are current.
- It must also end the month after the midpoint of the loan schedule. On a 30-year loan, that is after 15 years.
This is a real difference from some government loans, where insurance can last longer. Compare the specific loans side by side before you pick.
Some affordable programs, HomeReady and Home Possible, also reach 97% with cancellable insurance. They carry an income limit of 80% of area median income. Check the current program matrix before counting on them.
Loan Limits: A Ceiling on the Loan, Not the Price
The conforming loan limit caps the loan amount. It does not cap the home price. A bigger down payment lets you buy a more expensive home with a loan that still fits.
The Federal Housing Finance Agency (FHFA) sets the limit each year. Per its announcement, the baseline for a one-unit home is $832,750. High-cost areas get higher limits, capped at 150% of the baseline. Alaska, Hawaii, Guam and the U.S. Virgin Islands have their own higher figures.
Limits also rise with unit count, and they vary by county. Look up your county on FHFA’s site rather than guessing. Above the conforming limit, jumbo loans take over. They use their own credit floor and leverage rules.
Two- to Four-Unit Homes: Live in One, Rent the Rest
A duplex, triplex or fourplex can be an owner-occupied purchase. You live in one unit, and the loan can reach 95% LTV. This is a popular path for buyers who want help covering the payment.
The catch is that you must actually live there. The occupancy promise applies to the whole property. Rental income from the other units can count toward qualifying, but it follows its own documentation rules. Don’t assume the full rent counts.
Where the General Rule Breaks
The standard path covers most buyers. These cases fall outside it.
- Co-borrowers who live elsewhere. Only one borrower must occupy the home. Even so, a non-occupant borrower changes how the file is judged. Manual underwriting can set a lower DTI cap for the occupying borrower.
- A parent buying for a child. It is not a primary-residence loan for the parent if the parent won’t live there. Don’t try to make it one.
- Moving out early. Relocating for a job inside the first year is the classic problem. The waiver path exists, but you need to raise it with the servicer and document the reason.
- Renting it out later. After the minimum stay, you can usually turn a former primary home into a rental. Buying another primary home next month and renting this one out is the risky version.
- Credit events. The agencies set waiting periods: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu. Documented extenuating circumstances can shorten them.
- Manufactured homes. They have their own rows in the matrix and extra conditions.
- A trust as the borrower. Possible in some cases. Lendmire’s piece Can a Trust Take Out a Conventional Loan on a Primary Home? covers the details.
What Your Decision Looks Like in Practice
Picture a first-time buyer with a mid-600s score and a steady salary. She wants a one-unit home and has about 3% saved. A conventional loan at 97% LTV is on the table. She would pay mortgage insurance until the balance falls to 80% of the original value. If her score were higher, the insurance would cost less. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Now picture a repeat buyer with a larger down payment and a duplex in mind. He would use 95% LTV or less. He would need to live in one unit. The other unit’s rent might help him qualify. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Third, a buyer who isn’t sure she’ll move in. For her, the answer may be to wait, or to pick a loan that fits her real plan. A conventional loan for a primary home is built on a promise. Make only the one you will keep.
A short checklist helps:
- Will you live there within the move-in window and for at least a year?
- Does your DTI land under the automated ceiling after the new payment?
- Is your score above the floor, with room for pricing?
- Can you document your down payment and reserves?
- Does the loan amount fit under the conforming limit for your county?
If most answers are yes, conventional is worth a serious comparison. If not, other loans may fit better. Lendmire’s piece VA Cash-Out vs Staying Conventional on a 2-4 Unit Primary Home shows how that comparison can go.
Key Terms Defined
LTV (loan-to-value): The loan amount as a percentage of the home’s value. A 97% LTV means 3% down. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
DTI (debt-to-income): Your total monthly debts divided by your gross monthly income.
Overlay: A lender’s own rule that is stricter than the agency guide.
Mortgage insurance: Coverage that protects the lender when you put down less than 20%. On a conventional loan it can be cancelled.
Conforming loan limit: The maximum loan size Fannie Mae and Freddie Mac can buy. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Value acceptance: An option where Fannie Mae accepts the lender’s estimate of value, so no appraisal is needed on eligible loans.
Occupancy: How you use the property: primary residence, second home or investment property.
Frequently Asked Questions
Do I need 20% down for a conventional loan on my home?
No. A first-time buyer can put down 3% on a one-unit primary home with a fixed rate, and other buyers can put down 5%. Below 20% down, you pay mortgage insurance until it cancels. Lender guidelines and full file review apply. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
How long do I have to live in the home?
The standard security instrument asks you to move in within 60 days of signing and stay at least one year. Exceptions and waivers exist, such as active-duty military service. They are not automatic, so ask your servicer before you change plans.
Does mortgage insurance last for the life of a conventional loan?
No. You can request cancellation when you reach 80% of the original value. The servicer must end it automatically at 78%, if you are current. It also ends after the midpoint of the loan term.
Can I buy a duplex and live in one unit with a conventional loan?
Yes. Two- to four-unit principal residences can reach 95% LTV. You must live in one unit, and rental income from the others follows its own qualifying rules. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Is the conforming loan limit the most I can spend on a home?
No. It caps the loan amount, not the price. A larger down payment lets you buy a pricier home with a loan under the limit. Check your county’s figure on FHFA’s site.
If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
2. Fannie Mae Eligibility Matrix
3. Fannie Mae Eligibility Matrix (alternate copy)
4. Freddie Mac Guide Section 8405.1, Occupancy Waivers
5. Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios
6. Fannie Mae Loan-Level Price Adjustment Matrix
7. CFPB
8. FHFA 2026 Conforming Loan Limit Values
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Conventional Loans for Buyers With Many Accounts: What to Disclose · Conventional Loans for Buyers Using Gift Money: Who Can Give It · Conventional Loans for Vacation Home Buyers Who Will Use It Themselves
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.