A $425,000 home with 10% down means a $382,500 loan. At 6.75% versus 7.25%, the principal and interest payment is about $126 lower per month, or roughly $7,560 over five years. That is why a conventional loan requirements guide matters before you shop, not after you are under contract near Short Pump Town Center, in Midlothian, or across Chesterfield where price points vary fast and small pricing changes add up.
By Duane Buziak, Mortgage Maestro, NMLS#1110647
Conventional financing is the default lane for many buyers because it can offer lower monthly mortgage insurance than FHA, flexible property options, and strong pricing for borrowers with solid credit. But approval is not based on one number. It is a stack of variables – credit score, debt-to-income ratio, down payment, reserves, loan size, occupancy, and documentation quality. If one piece is weak, another sometimes compensates. If several are borderline, the loan gets more expensive or stops working.
Conventional loan requirements guide: the numbers that matter most
Most conventional loans follow Fannie Mae and Freddie Mac standards. For a one-unit property in 2025, the baseline conforming loan limit in most counties is $806,500, with higher limits in designated high-cost areas. Official conforming limits are published by FHFA at https://www.fhfa.gov. In practical terms, that means many buyers in Richmond, Henrico, Chesterfield, and Hanover can still finance above local median prices without moving into jumbo territory.
Credit is usually the first filter. A 620 score is a common minimum for many conventional programs, but that does not mean 620 gets the best deal. Pricing often improves materially at 680, 700, 720, and again at 740-plus. If you are buying with 3% down, lenders generally want stronger overall files because low-down-payment conventional loans carry tighter risk overlays. For investment properties and multi-unit homes, score expectations usually rise.
Debt-to-income ratio, or DTI, is the second major test. Many conventional files work best at 45% or below, though automated underwriting can sometimes approve higher ratios when credit, reserves, or assets are strong. A buyer earning $8,500 per month with $650 in car and student loan payments has more room than a buyer earning the same amount with $1,500 in recurring debt. The ratio is not judged in isolation. It is judged alongside the rest of the file.
Down payment rules depend on occupancy. Primary residence purchases can go as low as 3% down for eligible buyers. A second home commonly starts at 10% down. Investment properties often require 15% down at minimum, and many scenarios are cleaner at 20% to 25% down, especially when the borrower wants lower monthly payment pressure and easier reserve compliance.
What underwriters actually look for
Income documentation is where many otherwise strong files slow down. W-2 borrowers usually have the cleanest path when income is stable and hours are consistent. Self-employed borrowers face a different test because underwriters typically average qualifying income from tax returns and may add back certain non-cash expenses, but not every deduction helps. If you write off aggressively, your taxable income may not support the payment you feel comfortable making.
Asset review matters too. You need enough verified funds for down payment, closing costs, and sometimes reserves. Reserve requirements vary by property type and risk profile, but two months of the full housing payment is a common benchmark on some owner-occupied files, while second homes and investment properties can require more. Six months is not unusual for rentals, and layered-risk files can be pushed higher.
The property itself also has to qualify. Conventional loans usually work well for single-family homes, many condos, and planned unit developments, but condo approval can be the hidden issue. Project litigation, high investor concentration, deferred maintenance, and budget weakness can all disrupt an otherwise approvable borrower.
Local pricing context in Virginia
If you are buying in Central Virginia, local price data helps frame how much flexibility you need. Recent median sale prices have commonly landed around the mid-$300,000s in Chesterfield and around the low-to-mid $400,000s in Henrico, while Short Pump and western Henrico often trade above broader county medians. In Richmond City, neighborhood-level variation is wide enough that a buyer near The Fan may face a very different loan structure than one shopping farther east. Market trackers such as Redfin and Zillow publish local median sales data and trends at https://www.redfin.com and https://www.zillow.com.
That matters because a buyer at $350,000 may qualify comfortably with 5% down and modest reserves, while a buyer at $575,000 may still fit conforming limits but need a better score or lower DTI to keep payment manageable. In a place like Fredericksburg or Spotsylvania, where commuters often balance higher household incomes against existing debt, conventional approval can come down to whether the monthly liabilities are cleaned up before application.
Conventional vs FHA at a glance
| Factor | Conventional | FHA | |—|—|—| | Typical minimum score | Often 620 | Often 580 with 3.5% down | | Minimum down payment | 3% on some primary purchases | 3.5% | | Monthly mortgage insurance | Risk-based, can be lower for strong credit | Required, often costlier over time | | Loan limits | Conforming limits apply | FHA county limits apply | | Property standards | Generally less strict than FHA appraisal rules | More property condition scrutiny | | Best fit | Strong credit, stable income, lower long-term MI | Lower scores, thinner cash, higher DTI tolerance |
This is where comparisons with large lenders often get oversimplified. A national retail lender may advertise a sharp rate, but borrowers should compare total cost – rate, discount points, lender fees, mortgage insurance, and how the file is underwritten. On conventional loans especially, two quotes with the same rate can produce meaningfully different cash-to-close and five-year cost.
6-step roadmap to qualify faster
- Pull housing targets before house hunting. Know your payment ceiling, not just the maximum approval amount.
- Review all three score bands. Conventional pricing reacts to score tiers, so a 19-point jump can matter.
- Reduce revolving balances first. Credit cards often move the score and DTI faster than installment loans.
- Keep bank deposits clean and documentable. Large unexplained transfers create avoidable conditions.
- Match down payment to your real goal. Sometimes 5% down beats 3% because pricing and MI improve enough to justify it.
- Test the file with realistic taxes, insurance, and HOA dues. Buyers often underestimate the all-in payment.
FAQ
What is the minimum credit score for a conventional loan?
620 is a common floor, but stronger pricing usually starts higher. Borrowers at 680 to 740-plus often see the clearest benefit.
How much down payment do I need?
For a primary home, as little as 3% may be possible. Second homes and investment properties usually require more.
How high can my debt-to-income ratio be?
Many strong files are best at 45% or below, though automated approvals can sometimes go higher depending on compensating factors.
Do conventional loans require reserves?
Sometimes yes. Primary homes may need little or none in some cases, but rentals and second homes often require several months of reserves.
Are closing costs high on a conventional loan?
Closing costs often range from about 2% to 5% of the purchase price, depending on lender fees, title charges, escrows, taxes, and whether points are paid.
Is private mortgage insurance permanent?
No. On most conventional loans, PMI can eventually be removed when equity and servicing rules allow. That is one reason many buyers compare it favorably with FHA. Consumer guidance on mortgage costs is available at https://www.consumerfinance.gov.
Can self-employed borrowers get a conventional loan?
Yes, but tax return analysis is stricter. Qualifying income may be lower than gross revenue suggests.
A few trade-offs worth taking seriously
A conventional loan is not automatically better than FHA, VA, or USDA. If your score is in the low 600s, FHA may produce a stronger approval. If you are eligible for VA, the lack of monthly mortgage insurance can outperform conventional even when the rate looks similar. If you are buying an investment property and conventional cash-flow math is tight, DSCR or bank statement options may fit better despite higher rates.
For borrowers comparing firms like Rocket, Movement, Atlantic Coast, NFM, Alcova, C&F, or CrossCountry, the real test is not the ad. It is whether the quote is based on documented assumptions, whether lender fees are clearly broken out, and whether the loan officer spots issues before appraisal and underwriting. Speed matters, but structure matters more.
This article is for educational purposes only and does not constitute financial or legal advice.
The smartest conventional strategy is usually the simplest one: tighten the file before you write the offer, make sure the payment still works if taxes or insurance come in higher, and compare total five-year cost instead of chasing a headline rate.
Duane Buziak, Mortgage Maestro | NMLS: 1110647 | Licensed in VA · FL · TN · GA | VA Broker of the Year 2024-2025 | Top 1% Nationwide | Coast2Coast Mortgage | DuaneBuziakMortgageMaestro.com | (804) 212-8663