Conventional Loans

Conventional or FHA? It depends on your credit score

Almost nobody searches conventional in isolation. They are deciding between conventional and FHA, and the honest answer flips depending on where their credit sits.

With strong credit, conventional usually wins. Your mortgage insurance costs less because it is priced to your score, and it falls off at 20% equity rather than following you for thirty years.

With weaker credit, FHA often wins. Its mortgage insurance ignores your score entirely, so a 600-score borrower pays the same as a 700-score borrower. That is a bad deal on conventional and a good one on FHA.

With no score at all, conventional, because FHA cannot use a VantageScore. We run both and compare real numbers rather than assume.

Mortgage insurance is where the money actually is

Most people compare down payments, and the down payments are nearly identical at 3% versus 3.5%. Mortgage insurance is the real difference.

On conventional it is priced to your credit score and comes off automatically at 20% equity based on your original purchase price. On FHA it is a fixed cost regardless of score and, at low down payments, stays for the life of the loan.

Over ten years that gap is usually larger than anything the rate comparison produces.

Qualifying on your assets instead of your income

If you have substantial savings or investments but limited documentable income, both Fannie Mae and Freddie Mac allow accumulated assets to be converted into qualifying income. We take your eligible assets, subtract what you need for the down payment, closing costs, and reserves, and divide the remainder by a set number of months.

Freddie Mac Bulletin 2026-10, issued August 5, 2026, widened this considerably. The division factor drops from 240 months to 180, which increases the income the same assets generate by a third. All occupancy types are now permitted including investment properties. The previous 80% loan-to-value cap is removed. And the borrower age restriction on depository and securities accounts is gone, which turns what was effectively a retiree product into something available much earlier in life.

A minimum of $30,000 in net eligible assets is required, on a purchase or a no-cash-out refinance, with an automated approval.

One practical warning: do not shuffle money between accounts in the year before you buy without keeping the paper trail. A depository balance that dropped more than 20% over twelve months generally cannot be used, and one that rose more than 20% is capped, unless the change is documented as coming from a qualifying source.

Fannie and Freddie calculate this differently, so the same borrower can qualify for meaningfully different amounts depending on which one we run. We run both. Most lenders run one and quote you the answer.

Using a VantageScore or no score at all

Conventional is one of only two programs where a VantageScore can be used. The other is VA. FHA and USDA cannot.

If your credit file is thin, or a classic FICO returns no usable score, conventional may be the only realistic path. Three non-traditional credit references documented over twelve months, one of which must be rent or housing, and your down payment does not change.