What Is a Conventional Loan? Requirements and the NYC Catch
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A conventional loan is a mortgage not insured or guaranteed by a government agency. If it fits Fannie Mae and Freddie Mac’s rules and size, it’s conforming; above the 2026 limit of $1,249,125 in NYC, it’s a jumbo. You typically need 3% to 5% down, a 620 credit score, and PMI if you put down less than 20%.
We represent NYC buyers, and the conventional loan is what most of them use. Co-op boards generally won’t take FHA, and the down payments here are large, so “which loan” often answers itself.
The government doesn’t stand behind this one. That means the lender reads your file harder.
Conventional loan requirements, in one place
The loan the government doesn’t co-sign reads your file harder. Here’s what a conventional lender wants:
- Credit score: usually 620 or higher. A 740-plus score gets the best rate and the lowest PMI.
- Down payment: 3% to 5% for a primary home, more for anything else (see below).
- Debt-to-income: typically up to 43% to 45%, and closer to 50% with strong reserves or a high score.
- Documented income: two years of history, pay stubs, W-2s, and tax returns for the self-employed.
- Cash reserves: a few months of payments left after closing, more for a jumbo.
Our mortgages and financing hub shows how those factors drive every loan type. Our down payment and credit hub covers the qualifying side in depth.
Conventional loan down payment, tier by tier
3% gets you in, and then the board asks why it isn’t 20. The minimum depends on who you are and what you’re buying:
| Situation | Minimum down |
|---|---|
| First-time buyer, or income at or below 80% of area median | 3% |
| Standard primary residence | 5% |
| Second home | 10% |
| Two-to-four-unit property | 15% to 25% |
| Adjustable-rate mortgage | 5% |
Those are the lender’s floors. A NYC co-op board sets its own, usually 20% or higher. That number, not the lender’s 3%, is what most city buyers plan around.
The down payment also drives your PMI. On a $700,000 conventional loan, PMI at roughly 0.5% to 1% a year adds a few hundred dollars a month at 5% down. At 10% down it’s less, and at 20% it’s gone. That gap between 10% and 20% is the single biggest lever on a conventional loan’s monthly cost.
Conventional vs fha loan
The short version: conventional makes you earn it, FHA makes you keep the insurance.
An FHA loan is easier to qualify for with a lower score or a higher debt load, at 3.5% down. But its mortgage insurance lasts the life of the loan unless you put down 10% or refinance. A conventional loan asks more of your credit and savings, and in return its PMI is temporary and its overall cost is usually lower.
In New York the choice is often made for you. Many co-op buildings won’t accept an FHA loan at all, and FHA condo approval is rare. Our PMI guide compares the two kinds of mortgage insurance in detail.
Conforming vs jumbo loan in NYC
A conventional loan is “conforming” when it’s small enough for Fannie or Freddie to buy: up to $832,750 in most of the country, and up to $1,249,125 in high-cost areas, which includes every NYC county, per FHFA’s own 2026 conforming loan limit values. Above that, it’s a jumbo, still conventional but non-conforming.
The conforming limit is a number most NYC apartments left behind. Because the median city sale price sits above it, plenty of buyers here take a jumbo loan and never think of themselves as jumbo borrowers. Jumbo underwriting is stricter: more reserves, a higher score, and 10% to 20% or more down.
PMI on a conventional loan, and how it ends
PMI is the one mortgage fee with a built-in expiration date. If you put down less than 20%, you pay it monthly until you’ve built enough equity.
You can request cancellation once you owe 80% of the home’s original value, with a good payment history. It terminates automatically at 78%. A rising market helps: if your home’s value climbs, you can order a new appraisal and ask the lender to drop PMI based on the higher number. None of this requires a refinance.
What we see with NYC conventional buyers
The bank’s yes is the easy yes. A well-qualified buyer clears conventional underwriting without much drama. The harder yes is the co-op board, which applies its own down-payment minimum, its own debt limit, and a post-closing liquidity test the lender never asked about.
So we run a client’s numbers twice: once for the lender, once for a specific building’s board. On an average purchase our commission rebate returns roughly $22,000 at closing, which many buyers put straight toward hitting the 20% that skips PMI. Price your own deal on the closing cost calculators first.
Common questions
What is a conventional loan? A mortgage not backed by a government agency like the FHA or VA. It follows Fannie Mae and Freddie Mac guidelines and is “conforming” if it’s under the loan limit, or a jumbo if it’s over.
What credit score do I need for a conventional loan? Usually at least 620. A score of 740 or higher earns the best interest rate and the lowest private mortgage insurance cost.
How much down do I need for a conventional loan? As little as 3% for a first-time buyer or a lower-income borrower, 5% for a standard primary residence, and more for a second home or a multi-unit property.
Conventional or FHA in NYC? Usually conventional. Many co-op boards refuse FHA loans, FHA condo approval is uncommon, and conventional PMI is temporary while FHA’s often is not.
Is a conventional loan the same as a conforming loan? Not exactly. All conforming loans are conventional, but a conventional loan above the FHFA limit is a jumbo, which is conventional and non-conforming.
Nicole Fishman Benoliel co-founded NestApple in 2017. She's a lawyer admitted to the New York bar - her law degree is from La Escuela Libre de Derecho in Costa Rica, with further study at IE Business School in Madrid and an LLM from Fordham in New York. She does not act in a legal capacity at NestApple; every client is referred to an attorney who handles real estate deals full time.
