From 3% down — and PMI that ends.
Conventional financing is the most-used mortgage in California, and its defining advantage is one most borrowers underestimate: unlike FHA, the mortgage insurance goes away. Once you reach 20% equity you can request cancellation, and at 78% it drops automatically. Over a decade that difference is measured in tens of thousands of dollars.
Reach 20% equity — through payments, appreciation, or both — and you can request PMI removal.
What a conventional loan actually is
It's defined by what it isn't: a mortgage not insured or guaranteed by any government agency.
A conventional loan is originated and funded by a private lender rather than being backed by FHA, VA, or USDA. Most conventional loans are conforming, meaning they follow the guidelines set by Fannie Mae and Freddie Mac and can therefore be sold to them after closing.
That last detail is the reason conventional pricing is so competitive. Because lenders know they can sell a conforming loan, they compete hard on rate — and because the guidelines are standardized, the underwriting rules are largely consistent from lender to lender. It's the deepest, most liquid corner of the mortgage market, and roughly the default choice for California borrowers who qualify.
Down payments start at 3% for eligible first-time buyers, 5% is the standard for repeat buyers, and 20% eliminates mortgage insurance from day one. Conventional financing works for primary residences, second homes, and investment properties, and covers one to four unit properties — a flexibility no government program matches.
The trade-off is that qualifying is more rigorous than FHA. You'll generally need a 620 minimum credit score, stable documented income, and a debt-to-income ratio under about 45%. In exchange you get better long-term economics — chiefly, mortgage insurance that ends.
PMI that actually ends
This is the single most valuable feature of conventional financing, and the reason it beats FHA over any long holding period.
Two ways it comes off
Automatic termination at 78% LTV. Once your loan balance reaches 78% of the original property value on the amortization schedule, the servicer must remove PMI without you asking, provided you're current on payments.
Cancellation by request at 80% LTV. You can request removal earlier, once you reach 20% equity. This is the route worth knowing about, because appreciation counts — not just principal paydown.
That distinction matters enormously in California. In a market where a home can appreciate substantially in a few years, a buyer who put 5% down may reach 20% equity through value growth long before the amortization schedule would get them there. Most homeowners never ask, and quietly keep paying.
What it's worth
PMI on a conventional loan typically runs between 0.3% and 1.5% of the loan amount annually, priced by your credit score and loan-to-value. On a $570,000 loan at 0.5%, that's roughly $237 a month — about $2,850 a year.
Compare that to FHA, where mortgage insurance at 0.55% annually stays for the life of the loan if you put down less than 10%. Over a decade of ownership, the difference between insurance that cancels and insurance that doesn't runs well into five figures.
Worth doing: if you've owned a California home for a few years and your value has risen, ask your servicer what's required to cancel PMI. Usually it's a written request and a current appraisal or broker price opinion. A few hundred dollars to stop paying a few thousand a year.
How much you actually need down
Conventional down payment requirements vary by occupancy and buyer profile more than most people realize.
| Situation | Typical minimum down | Notes |
|---|---|---|
| First-time buyer, primary residence | 3% | Via programs like Fannie Mae HomeReady or Freddie Mac Home Possible, subject to income limits in some cases |
| Repeat buyer, primary residence | 5% | The standard conventional minimum for a one-unit primary home |
| Primary residence, no PMI | 20% | Eliminates mortgage insurance entirely from closing |
| Second home | 10% | Must be a genuine second home, not a rental; pricing add-ons apply |
| Investment property, 1 unit | 15% minimum | Many lenders want 20–25% for better pricing; 15% is the floor, not the norm |
| Investment property, 2–4 units | 25% | Higher reserves and stronger credit typically required |
A correction worth stating plainly: you'll see 10% quoted for investment properties on plenty of mortgage sites, including this one previously. That isn't accurate for conventional financing. Conventional investment-property loans generally require at least 15% down on a one-unit property, and most lenders price meaningfully better at 20–25%. Multi-unit investment properties typically require 25%. Planning around 10% will produce a failed pre-approval.
If you're an investor working with less cash, look at DSCR and other Non-QM programs, which qualify on the property's rental income rather than your personal debt-to-income — a different set of trade-offs, but a different set of doors.
The 3%-down conventional programs
Many California buyers assume 3% down means FHA. It doesn't have to — and for buyers with decent credit, the conventional route is frequently cheaper.
Fannie Mae's HomeReady and Freddie Mac's Home Possible both allow qualified buyers to purchase with as little as 3% down on a one-unit primary residence. Both are designed for low- to moderate-income borrowers and carry area median income limits that vary by census tract — and in some higher-cost California areas, those limits are waived entirely.
What makes them worth asking about specifically:
- Reduced PMI coverage requirements compared with standard conventional at the same loan-to-value, which lowers your monthly cost.
- Flexible income sources — boarder income, rental income from an accessory unit, and non-occupant co-borrower income can all help you qualify. In an ADU-friendly state, that first one matters.
- Gift funds permitted for the entire down payment, and the programs pair with many down payment assistance offerings.
- The PMI still cancels — unlike FHA, you're not locked into mortgage insurance for the life of the loan.
The comparison most buyers never get run: a borrower with a 700 credit score and 3–5% down is often better off on conventional than FHA over a five-to-ten-year hold, purely because the mortgage insurance ends. But the monthly payment can look higher in year one, so the FHA option gets chosen on the spot. Ask for both scenarios with the total cost over your expected holding period — not just the month-one payment.
Why credit score matters more on conventional
Conventional pricing runs on a risk-based matrix. The gap between credit tiers is wider here than on any government-backed program.
Rate pricing tiers
Conventional rates step at defined credit thresholds — commonly 620, 660, 680, 700, 720, 740, and 760. Crossing a single threshold can change both your rate and your loan-level pricing adjustments. Being two points below a break costs real money.
PMI is credit-priced too
This compounds the effect. Your PMI rate is set by credit and LTV together, so a lower score raises your rate and your mortgage insurance simultaneously. It's why FHA — whose insurance is a flat rate regardless of score — sometimes wins for fair-credit borrowers.
Timing can be worth waiting for
If you're a few points below a pricing threshold, targeted work — paying down a revolving balance, correcting a reporting error — can move you across it in a single cycle. On a large California loan that's frequently worth more than any rate you'd negotiate.
Before you lock, ask this: "how far am I from the next pricing tier, and what would it take to get there?" It's a question a good broker should answer unprompted, and it's one of the few levers a borrower genuinely controls. I'll run your credit report against the tier breaks and tell you honestly whether waiting is worth it — or whether you're already where you need to be.
High-balance conforming — the tier most buyers miss
In high-cost California counties there's a middle tier between standard conforming and jumbo that's genuinely worth structuring toward.
Standard conforming
The 2026 baseline in most California counties. Best pricing, widest lender competition, down payments from 3%.
High-balance conforming
In high-cost counties, loans above the baseline but under the ceiling are still conforming. Fannie and Freddie buy them. A modest pricing add-on applies, but guidelines stay standardized and down payment requirements stay conventional.
Jumbo
Outside agency guidelines. Lender-specific underwriting, typically larger down payment, deeper reserves, and pricing that varies widely between lenders.
Why this matters: a buyer purchasing at $1.4 million in Los Angeles County with 20% down needs a $1,120,000 loan — that's high-balance conforming, not jumbo. Quoted as jumbo, they'd likely face a larger down payment requirement, deeper reserve requirements, and different pricing than they actually qualify for.
Adjusting your down payment slightly to bring the loan under your county's ceiling is a legitimate structuring move. It's the first thing worth checking on any California purchase between roughly $900,000 and $1.6 million. If you're above the ceiling regardless, see jumbo loans in California.
Conventional loan requirements
Guidelines come from Fannie Mae and Freddie Mac, so they're more consistent lender to lender than FHA or jumbo — but individual lenders still apply overlays.
Close to the line on credit or DTI? That's exactly where lender selection changes the answer. Call me at (619) 436-5578 and let's see where your file actually lands.
- Credit score of 620 minimum, with pricing improving at each tier above it and the best available terms at 740 and up. Below 620, FHA is usually the better route.
- Debt-to-income up to about 45%, with automated underwriting sometimes approving to 50% when you have strong reserves, high credit, or significant residual income.
- Two years of documented income history — W-2s, pay stubs, and tax returns. Self-employed borrowers bring business returns and a P&L; if returns understate real income, ask about alternative documentation.
- Reserves — not always required on a primary residence, but commonly required on second homes, investment properties, and multi-unit purchases. Retirement and brokerage accounts typically count at a discount.
- Seasoning after credit events — generally around four years after a Chapter 7 bankruptcy and seven after a foreclosure, with documented extenuating circumstances sometimes shortening those. FHA's waiting periods are shorter.
- Eligible property — one to four units, structurally sound, residential in use. Condos require project review; see the note below on what that actually involves.
What condo project review really requires
Condos are a large share of the California market, and the rules around financing them are widely misstated — including, previously, on this page.
When you buy a condo with conventional financing, the lender reviews the project as well as the borrower. That review looks at the HOA's budget and reserve funding, insurance adequacy, the share of units owned by any single entity, delinquency rates on HOA dues, litigation involving the association, and the amount of commercial or non-residential space in the building.
The correction: you'll frequently read that "at least 51% of units must be owner-occupied." That's a garbled version of a real rule. Owner-occupancy ratio requirements generally apply to investment property purchases in non-established projects — not to someone buying a condo as their primary residence in an established project, where there is typically no owner-occupancy minimum at all.
Stated as a blanket rule, it wrongly discourages eligible California buyers from condos they could absolutely finance. The accurate answer is that it depends on occupancy type and project status — and it's worth confirming for the specific building rather than assuming.
What genuinely does derail California condo financing more often: inadequate HOA reserves, active litigation involving the association, and in recent years insurance adequacy, which has become a live issue across parts of the state. Any of these can make an otherwise fine building difficult to finance conventionally.
The practical advice: get the project reviewed early, before your appraisal and well before your contingencies expire. A building that fails review isn't always a dead end — some issues have workarounds, and different lenders reach different conclusions — but discovering it in week four of escrow is a bad position to negotiate from.
Choosing your term
Conventional gives you more structural choice than any other program. Which one wins depends mostly on how long you'll hold the loan.
30-year fixed
The default in California, and for good reason: the lowest payment for a given loan amount and complete payment certainty for three decades. In an expensive market, payment stability has real value.
15-year fixed
A lower rate than the 30-year, dramatically less total interest, and much faster equity build — which also means faster PMI cancellation. The payment is substantially higher, so it suits strong, stable income.
20-year fixed
The overlooked middle option. Faster payoff and less interest than a 30-year, with a payment far more manageable than a 15-year. Worth pricing if the 15 is out of reach.
Conventional ARM
A fixed initial period — commonly 5, 7, or 10 years — then adjustments. Genuinely sensible if you expect to sell or refinance inside that window, and a real gamble if you don't. See how ARM structures work before choosing one.
Buying down the rate
Paying points lowers your rate permanently. Whether it pays depends entirely on how long you keep the loan — ask for the break-even month, not just the lower payment.
Conventional refinance
Already own? A conventional refinance can lower your rate, change your term, or move you off an FHA loan to shed permanent mortgage insurance.
Refinancing out of FHA into conventional
If you bought with an FHA loan and put down less than 10%, your mortgage insurance never cancels — it runs for the life of the loan.
That's the structural reason a great many California homeowners refinance from FHA into conventional once they've built roughly 20% equity. It isn't about chasing a lower rate — it's about eliminating a permanent monthly charge.
In California, appreciation often does the work. A buyer who purchased with 3.5% down a few years ago may already be well past 20% equity through value growth alone, without having paid the balance down much at all. The FHA premium is still being charged every month, and nothing triggers automatically to stop it.
The honest caveat: this only makes sense if the new conventional rate doesn't cost you more than the mortgage insurance saves. If you're holding a 3% FHA loan from 2021, refinancing at today's rates to shed a $200 monthly premium is usually a bad trade — you'd be repricing the whole balance. In that case a HELOC for equity access, or simply waiting, is the better answer.
It's a five-minute calculation and worth running properly rather than assuming either way.
How a California conventional loan closes
Conventional purchases typically run three to five weeks from application, and are usually the fastest of the major programs.
Program comparison first
Before recommending conventional, I run it against FHA — and against VA or USDA if you might qualify — on total cost over the years you actually plan to own. Conventional wins often, but not always, and you should see the arithmetic either way.
Credit tier check
I look at where you sit relative to the pricing thresholds. If you're a few points from a break that would meaningfully improve your rate and PMI, I'll tell you what it would take and whether it's worth the wait.
Pre-approval
Full income, credit, and asset review submitted through automated underwriting. A documented pre-approval letter — the kind that strengthens an offer in a competitive California market.
Lender comparison
Conforming guidelines are standardized, but pricing and overlays are not. I shop the file across 50+ wholesale lenders and compare rate, PMI cost, and lender fees together rather than in isolation.
Appraisal and underwriting
Appraisal ordered; condo projects reviewed early. I coordinate conditions so you're not chasing paperwork while under contract.
Close
Final approval, signing, funding, keys — with a clear note of when your PMI is projected to cancel, so you know the date rather than discovering it years later.
Where conventional isn't the right answer
Real limitations
Credit standards are stricter. Below 620 you generally aren't eligible, and between 620 and 680 the pricing penalty is steep enough that FHA frequently wins outright.
Longer waits after credit events. Roughly four years post-bankruptcy and seven post-foreclosure, versus FHA's two and three. If you're inside those windows, FHA is likely your route.
Not assumable. Unlike FHA and VA loans, a conventional mortgage can't be taken over by a future buyer. In a rising-rate market that's a genuine resale disadvantage.
Condo project review can block you. A qualified borrower can be declined because of the building's reserves, litigation, or insurance — none of which you control.
Things to weigh
PMI at 3% down isn't cheap. The insurance cancels eventually, but at high loan-to-value with mid-tier credit it can cost more monthly than FHA's premium. The advantage is long-run, not immediate — which matters if you might move in three years.
Don't stretch to the DTI ceiling. Qualifying at 50% and living comfortably at 50% are different things, particularly in California where property taxes and insurance keep climbing.
Points aren't automatically worth it. Buying down the rate only pays if you keep the loan past the break-even. Ask for that month before you agree.
Compare total cost, not the month-one payment. This is the single most common way California buyers end up in the wrong program.
I'll show you the total cost, not the teaser.
I'm Jonathan Boukarim, an independent licensed mortgage broker based in San Diego. Conventional financing is the right choice for most California buyers with solid credit — but the way it gets sold usually focuses on the month-one payment, which is exactly the number that hides the PMI question.
When you call (619) 436-5578, you reach me directly. I'll show you conventional against FHA on total cost over your actual holding period, tell you where you sit relative to the credit pricing tiers, check whether high-balance conforming beats jumbo for your purchase price, and give you a projected PMI cancellation date at closing so you know when to ask.
Other California mortgage programs
If conventional isn't your cheapest route, one of these will be.
California Conventional Loan FAQs
What is a conventional loan?+
A mortgage that is not insured or guaranteed by a government agency — unlike FHA, VA, or USDA loans. Most conventional loans are conforming, meaning they follow Fannie Mae and Freddie Mac guidelines and can be sold to them after closing. It's the most common mortgage type in California and can be used for primary residences, second homes, and investment properties across one to four units.
What is the minimum down payment for a conventional loan in California?+
As little as 3% for qualified first-time buyers through programs like HomeReady and Home Possible, and 5% as the standard for repeat buyers on a primary residence. Second homes generally require 10%. Investment properties require a minimum of 15% on a one-unit property — most lenders price better at 20–25% — and typically 25% on 2–4 units.
When does conventional PMI go away?+
Two ways. It terminates automatically once your balance reaches 78% of the original property value on the amortization schedule, provided you're current. Or you can request cancellation earlier at 80% loan-to-value — and this route matters more, because appreciation counts toward it, not just principal paydown. In an appreciating California market that can arrive years earlier than the automatic date. Most homeowners never ask and keep paying.
How much does PMI cost?+
Typically between 0.3% and 1.5% of the loan amount annually, priced by your credit score and loan-to-value together. On a $570,000 loan at 0.5%, that's roughly $237 a month. Because it's credit-priced, a lower score raises both your rate and your PMI simultaneously — which is why FHA, whose premium is flat regardless of score, sometimes wins for fair-credit borrowers.
Is a conventional loan better than an FHA loan?+
Usually yes with 700+ credit and 5% or more down, because the PMI is affordable and it cancels — while FHA's premium runs for the life of the loan below 10% down. FHA usually wins with lower credit or minimal cash, since its insurance doesn't get more expensive as your score falls. The deciding factor is total cost over your expected holding period, not the month-one payment. I run both before recommending either.
What credit score do I need for a conventional loan?+
620 is the general minimum, with pricing improving at each tier above it and the best terms at 740 and up. The tiers are real steps rather than a smooth curve, so being a few points below a threshold can cost meaningfully. If you're close to a break, targeted credit work may be worth more than any rate you'd negotiate — ask before you lock.
Can I use a conventional loan for an investment property?+
Yes, on one to four unit properties. Expect a minimum of 15% down on a one-unit investment property — most lenders price considerably better at 20–25% — and typically 25% on multi-unit. Reserves and credit expectations are higher than for a primary residence. If the cash requirement is the obstacle, DSCR programs qualify on rental income instead of your personal DTI.
Do all condos require 51% owner-occupancy?+
No — that's a widely repeated but garbled version of a real rule. Owner-occupancy ratio requirements generally apply to investment purchases in non-established projects, not to someone buying a condo as a primary residence in an established project. What more often blocks California condo financing is inadequate HOA reserves, active litigation, or insurance adequacy. Get the specific building reviewed early rather than assuming either way.
What is high-balance conforming, and is it different from jumbo?+
Yes, meaningfully different. In high-cost California counties, loans above the $832,750 baseline but under the $1,249,125 ceiling are still conforming — Fannie and Freddie buy them, guidelines stay standardized, and a modest pricing add-on applies. True jumbo sits above the ceiling with lender-specific underwriting and typically larger down payment and reserve requirements. A $1.1 million loan in Los Angeles County is high-balance conforming, not jumbo.
Should I refinance from FHA to conventional to drop mortgage insurance?+
Only if the new rate doesn't cost more than the insurance saves. If you're carrying a low-rate FHA loan from 2020–2022, refinancing at today's pricing to shed a monthly premium usually loses money overall, because you reprice the entire balance. If your FHA rate is close to current market and you've reached 20% equity, it often wins clearly. It's a quick calculation and worth running properly.
How long after bankruptcy or foreclosure can I get a conventional loan?+
Generally around four years after a Chapter 7 bankruptcy discharge and seven years after a foreclosure, with documented extenuating circumstances sometimes shortening those periods. These waits are longer than FHA's — roughly two and three years respectively — so if you're inside the window, FHA is likely the better route for now, with a conventional refinance later.
Is a 15-year conventional loan worth the higher payment?+
It depends on whether the higher payment is comfortable rather than merely possible. The 15-year carries a lower rate, dramatically less total interest, and builds equity fast enough that PMI cancels much sooner. But the payment is substantially higher and it's not reversible. A 20-year fixed is the frequently overlooked middle ground worth pricing alongside both.
See your real conventional numbers
Get pre-approved and I'll show you your rate, your PMI cost, your projected cancellation date, and how conventional compares to FHA over the years you actually plan to own the home.
Jonathan Boukarim · Licensed California Mortgage Broker · NMLS 1892952 · (619) 436-5578Get Your Conventional Pre-Approval
Real numbers on rate, PMI, and total cost — no obligation.