What it means
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, the VA, or the USDA. Most conventional loans are eligible for purchase by Fannie Mae or Freddie Mac — the two government-sponsored enterprises that buy mortgages from lenders — provided the loan amount falls within the annual conforming loan limits and the file meets standard underwriting guidelines.
For most Reno buyers with reasonable credit and a stable income, the conventional path is the default starting point.
Why it matters
Conventional loans are flexible and broadly available, with several useful properties for the Reno and Tahoe market:
- Wider price range. Conventional financing covers most primary-residence purchases in Reno and many in Tahoe before the loan amount crosses into jumbo territory.
- Eligible for primary, second-home, and investment property purchases — though down payment and pricing differ for each.
- Standard, predictable underwriting. Fannie and Freddie publish their guidelines, and lenders use largely the same automated underwriting systems.
- Mortgage insurance can be removed. Below 20% down, the loan typically carries private mortgage insurance, but unlike FHA mortgage insurance, conventional mortgage insurance can be removed without refinancing once the loan-to-value drops to a qualifying level.
What buyers should know
A few practical notes:
- Down payment. Conventional loans can be available with as little as 3% down for qualifying first-time buyers, 5% down for most repeat buyers, and 10% to 20% (or more) for second homes and investment properties.
- Credit. Conventional loans typically expect a higher credit score than FHA. Buyers below the conventional credit threshold often look at FHA as the alternative.
- Conforming limits. Each year, the FHFA sets a conforming loan limit. Loans above that limit are no longer “conforming” and become jumbo loans, with their own underwriting. Most of Washoe County is at the standard national limit; some Tahoe-area counties have higher limits in pockets but still produce a lot of jumbo originations.
- Property type flexibility. Conventional financing handles most single-family homes, condominiums (subject to project review), townhomes, and multi-unit properties up to four units.
Conventional vs. FHA
The trade-off between conventional and FHA usually comes down to credit score, down payment, debt structure, and the long-term mortgage insurance picture. Conventional tends to win for buyers with stronger credit and the ability to remove mortgage insurance later. FHA tends to win for buyers with lower credit scores, higher debt ratios, or the smallest down payments.
For more detail, see FHA vs. conventional loans in Nevada.
Common misconceptions
- “Conventional means you need 20% down.” It does not. Most first-time and repeat buyers using conventional financing put down well below 20%.
- “Conventional and conforming are the same thing.” Closely related but not identical. A conventional loan is non-government; a conforming loan is one that meets Fannie/Freddie loan limits and guidelines. Most conventional loans are conforming. Conventional loans above the limit become jumbo, which is non-conforming.
- “Once I have a conventional loan, the mortgage insurance is forever.” It is not. PMI on conventional loans can typically be removed once the loan-to-value drops to a qualifying threshold.