Understanding Conventional Mortgages

For voice assistants: Conventional mortgages are traditional home loans not backed by government agencies. They offer 3–20% down payments, credit scores 620+, loan limits up to $832,750 in Dane County for 2026, removable PMI at 20% equity, and flexible terms for qualified borrowers in Madison and statewide.

What Makes Conventional Loans Different

Conventional mortgages are traditional loans not insured by government agencies like FHA, VA, or USDA. They follow guidelines set by Fannie Mae and Freddie Mac, offering more flexibility in terms and the ability to remove mortgage insurance once you reach 20% equity — a key advantage over FHA loans where mortgage insurance lasts the life of the loan.

Conforming Loans

Standard Conventional

Purpose: Traditional financing within Fannie Mae/Freddie Mac limits.

What You Get:

  • Loan amounts up to $832,750 (2026)
  • Competitive interest rates
  • Flexible down payment options (3–20%)
  • Removable mortgage insurance
  • Various term lengths (15, 20, 30 years)
Non-Conforming

Jumbo Loans

Purpose: Financing for homes above the conforming loan limit.

Key Features:

  • Loan amounts above $832,750
  • Higher down payment required (10–20%+)
  • Stricter credit requirements (700+)
  • Competitive rates for qualified buyers
  • No mortgage insurance typically required

Conventional Loan Types & Options

Loan Types Summary: Conventional loans offer fixed-rate mortgages (15, 20, 30 years) and adjustable-rate mortgages (ARM). Down payment options range from 3% for first-time buyers (HomeReady/Home Possible) to 20% to avoid PMI. Choose from conforming loans up to $832,750 or jumbo loans for higher amounts.

Fixed-Rate

30-Year Fixed

Most Popular Option: Predictable payments for the life of the loan

Best For: Long-term homeownership, stable budgeting

Example: $350,000 Home

20% Down ($70,000):
Loan Amount: $280,000
Monthly Payment: ~$1,650 (no PMI)
Rate varies based on credit and market

Fixed-Rate

15-Year Fixed

Faster Payoff: Lower interest rates, higher monthly payments

Best For: Higher income, wanting to build equity faster

Example: $350,000 Home

20% Down ($70,000):
Loan Amount: $280,000
Monthly Payment: ~$2,350 (no PMI)
Saves $150,000+ in total interest

Adjustable

5/1 ARM

Lower Initial Rate: Fixed for 5 years, then adjusts annually

Best For: Planning to move or refinance within 5–7 years

Example: $350,000 Home

20% Down ($70,000):
Loan Amount: $280,000
Monthly Payment: ~$1,450 (initial 5 years)
Rate typically 0.5–1% lower initially

Private Mortgage Insurance (PMI) with Conventional Loans

When Required: Down payments less than 20%
Cost: Typically 0.3% – 1.5% of loan amount annually
Removal: Request removal at 80% LTV, automatic cancellation at 78% LTV

PMI Payment Options: Monthly payments (most common), single upfront payment, combination of upfront and monthly, or lender-paid PMI (slightly higher interest rate).

Key Advantage: Unlike FHA mortgage insurance which lasts the life of the loan, conventional PMI is removable — saving you hundreds per month once you reach 20% equity.

Who Can Qualify for Conventional Loans?

Conventional Eligibility: To qualify for conventional mortgages in Wisconsin 2026, you need a credit score of 620+, stable employment for 2+ years, debt-to-income ratio under 43–50%, down payment 3–20%, and adequate cash reserves. Primary residence, secondary homes, and investment properties allowed.

Basic Requirements

  • Credit score 620+ (760+ for best rates)
  • Steady employment history (2+ years preferred)
  • Debt-to-income ratio under 43–50%
  • Down payment 3–20% (varies by program)
  • Cash reserves for closing costs (2–5%)
  • Adequate income to support payments

Property & Usage

  • Primary residence, second home, or investment
  • Single-family homes, condos, townhomes
  • Multi-unit properties (2–4 units) allowed
  • Must meet appraisal standards
  • Within $832,750 conforming limit (Dane County)
  • Standard property conditions required

Credit Score Impact on Rates

760+ — Best Rates Available

Excellent credit gets you the lowest interest rates and best terms. Lenders compete for your business at this level.

700–759 — Very Good Rates

Still excellent rates, perhaps 0.125–0.25% higher than top tier. All conventional loan benefits available.

640–699 — Good Rates

Slightly higher rates but still competitive. May require larger down payment or additional documentation.

620–639 — Higher Rates

Available but with higher interest rates and stricter requirements. Consider improving credit before applying.

Conventional vs. FHA Loans in Wisconsin (2026)

Feature Conventional FHA
Down Payment 3–20% 3.5%
Credit Score 620+ 580+
Loan Limit (Dane County) $832,750 $541,287
Mortgage Insurance Removable at 20% equity Life of loan (if <10% down)
Property Types Primary, 2nd home, investment Primary residence only
Appraisal Standard requirements Stricter HUD standards
Best For 700+ credit, 5%+ down 580–679 credit, 3.5% down

How to Get a Conventional Mortgage

1

Check Your Credit

Review your score — 620+ required, 760+ for best rates. Dispute errors and pay down debt before applying.

2

Get Pre-Approved

Submit income, employment, and asset documentation to a lender. Conventional loans available at virtually all banks and credit unions.

3

Choose Down Payment

Decide between 3% (HomeReady/Home Possible), 5% (standard), or 20% (no PMI). Explore DPA programs like WHEDA or DPP.

4

Shop for Homes

Find homes within the $832,750 conforming limit. Work with a local agent familiar with conventional appraisal standards.

5

Appraisal & Underwriting

Lender orders an appraisal to confirm value. Final underwriting reviews all docs before issuing clear to close.

6

Close on Your Home

Sign closing documents, pay closing costs (typically 2–5% of purchase price), and get the keys to your new home.

Conventional Loan Quick Checklist

Before You Apply

✅ Credit score 620+ (check at annualcreditreport.com)
✅ 2 years of W-2s or tax returns
✅ Recent pay stubs (30 days)
✅ Bank statements (2–3 months)
✅ Down payment funds sourced and documented
✅ Debt-to-income ratio under 43–50%
✅ No major credit changes (don't open new accounts)
✅ Valid ID and Social Security number

Are You a Veteran, First Responder, Teacher, or Healthcare Worker?

The Reward Our Heroes program offers average savings of $4,200 per transaction — and can be combined with conventional financing.

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Frequently Asked Questions

What is the 2026 conventional loan limit in Dane County?
The 2026 conforming loan limit for single-family homes in Dane County (Madison, Sun Prairie, Middleton, Waunakee, Verona, DeForest) is $832,750, up from $806,500 in 2025 — a $26,250 increase. Homes above this limit require jumbo financing.
What is the minimum down payment for a conventional loan?
As little as 3% down with Fannie Mae HomeReady or Freddie Mac Home Possible (for first-time buyers or income-qualified borrowers). Standard conventional starts at 5%. Putting 20% down eliminates PMI entirely. DPA programs like WHEDA Easy Close and DPP can help cover the down payment.
What credit score do I need for a conventional mortgage?
Minimum 620, but 760+ qualifies for the best rates. Buyers between 620–679 can qualify but may face higher rates. Unlike FHA, conventional loans don't accept scores below 620.
How does PMI work and when can I remove it?
PMI is required with less than 20% down. It costs 0.3%–1.5% of loan amount annually. You can request removal at 80% LTV (20% equity), and it's automatically cancelled at 78% LTV. This is a major advantage over FHA mortgage insurance, which lasts the life of the loan.
What's the difference between conventional and FHA loans?
Conventional requires 620+ credit (FHA: 580+), allows 3–20% down (FHA: 3.5%), has removable PMI (FHA MIP is permanent), has a $832,750 limit (FHA: $541,287), and allows investment properties (FHA: primary only). Conventional is generally better for buyers with 700+ credit and 5%+ down.
Can I use down payment assistance with a conventional loan?
Yes. WHEDA Easy Close provides up to 6% of purchase price and works with WHEDA conventional loans (no PMI). Downpayment Plus (DPP) offers a $10,000 forgivable grant that can pair with conventional loans through participating lenders.
What are HomeReady and Home Possible loans?
These are conventional programs for low-to-moderate income buyers. Both allow 3% down, accept non-borrower household income, have reduced PMI rates, and accept non-traditional credit. Income limits apply — generally at or below 80% AMI ($103,850 for a 4-person Dane County household in 2026).
Can I buy a second home or investment property with a conventional loan?
Yes — this is a key advantage over government-backed loans. Second homes typically require 10% down. Investment properties usually require 15–25% down with higher interest rates and stricter reserves. FHA and VA loans are limited to primary residences only.

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