Conventional loans are the most widely used mortgage in Utah — and for buyers with a 620+ credit score, they frequently beat FHA on total long-term cost. Here's everything you need to know about how they work, which program fits your situation, and when they're the smarter choice.
What Is a Conventional Loan?
A conventional loan is any mortgage that isn't backed by a government agency (FHA, VA, or USDA). Instead, it follows guidelines set by Fannie Mae or Freddie Mac — the two government-sponsored enterprises that purchase mortgages from lenders and keep the housing market liquid.
Because there's no government guarantee, lenders apply stricter credit standards than FHA. But in exchange, conventional loans offer real advantages: no upfront mortgage insurance premium, PMI that goes away, higher loan limits, and fewer property restrictions.
The Three 3%-Down Conventional Programs
You don't need 20% down for a conventional loan. Three programs let you get in with just 3%:
Conventional 97
Open to any first-time homebuyer (or buyers who haven't owned a home in three years), Conventional 97 is the most straightforward low-down-payment conventional option. You put 3% down, pay PMI until you hit 80% LTV, and the loan is a standard 30-year fixed. Minimum credit score: 620.
HomeReady (Fannie Mae)
HomeReady is designed for low-to-moderate income buyers — your household income must be at or below 80% of the area median income (AMI) for your county. In Salt Lake County that's roughly $68,000 for a single borrower in 2026. The payoff: reduced PMI rates compared to Conventional 97, and the ability to count rental income from an accessory dwelling unit (ADU) toward your qualifying income.
Home Possible (Freddie Mac)
Freddie Mac's answer to HomeReady. Same 80% AMI income cap, same 3% down, similar reduced PMI pricing. Home Possible allows more flexibility in how income is documented and has a slightly higher minimum credit score (660 vs. 620 for HomeReady).
2026 Conforming Loan Limits in Utah
The 2026 conforming loan limit for most Utah counties is $806,500 for a single-family home. That's $282,275 higher than the FHA limit of $524,225 — which matters when you're buying in the $500K–$800K range that covers a lot of Salt Lake County.
| County | 2026 Limit |
|---|---|
| Salt Lake County | $806,500 |
| Utah County | $806,500 |
| Davis County | $806,500 |
| Weber County | $806,500 |
| Washington County | $806,500 |
Loans above the conforming limit require a jumbo mortgage, which has different qualification standards and is typically harder to get approved for.
How Conventional PMI Works — and When It Disappears
If you put less than 20% down on a conventional loan, you'll pay private mortgage insurance (PMI). But unlike FHA mortgage insurance, conventional PMI isn't forever.
When PMI Drops
- At 80% LTV: You can request PMI cancellation once your balance reaches 80% of the original purchase price — either through payments alone or through a new appraisal showing your home has appreciated.
- At 78% LTV: PMI cancels automatically based on your scheduled amortization. No request needed.
- At midpoint of loan term: PMI must cancel at the loan's midpoint regardless of balance, if the loan is current.
How Much Does PMI Cost?
PMI on a conventional loan ranges from roughly 0.2% to 1.5% of your loan amount annually, depending on your credit score and down payment. Here's what a $400,000 loan looks like:
| Credit Score + Down | Est. Monthly PMI |
|---|---|
| 760+ score, 3% down | ~$83/mo |
| 720–759, 3% down | ~$100/mo |
| 680–719, 3% down | ~$150/mo |
| 760+ score, 5% down | ~$58/mo |
| 760+ score, 10% down | ~$35/mo |
Compare this to FHA MIP at $183/month on the same $400,000 loan — and remember, FHA MIP stays for the life of the loan for most buyers while conventional PMI disappears.
Conventional vs. FHA: When Each One Wins
This is the question we answer for almost every first-time buyer. Here's the honest breakdown:
Conventional Usually Wins When:
- Your credit score is 720 or higher — PMI costs drop significantly and total long-term cost favors conventional
- You're buying a condo — no need for FHA approval of the complex
- The home you want is priced above $524,225 — FHA won't go that high
- You plan to stay long-term — PMI cancellation saves you hundreds per month eventually
- You want to buy a second home or investment property — FHA is primary residence only
FHA Usually Wins When:
- Your credit score is below 680 — FHA PMI cost is actually lower than conventional PMI at low scores
- You have a higher debt-to-income ratio (43–50%) — FHA is more flexible
- You need 100% gift funds for the down payment
- You've had a bankruptcy within 4–7 years — FHA waiting periods are shorter
Credit Score Requirements in Detail
The official minimum for a conventional loan is 620, but what your score unlocks varies considerably:
- 620–679: Qualifying is possible, but PMI costs are higher and your interest rate will reflect the lower score. FHA may actually cost less per month at this range.
- 680–719: Solidly qualifying. PMI is moderate. Conventional is often competitive with FHA here.
- 720–739: Good territory. PMI rates start dropping meaningfully. Conventional is usually the better long-term choice.
- 740+: Best rates and lowest PMI. If you're here with 5%+ down, conventional wins decisively over FHA in nearly every scenario.
Can You Use Down Payment Assistance With a Conventional Loan?
Yes — though fewer DPA programs support conventional loans compared to FHA.
Utah Housing Corporation (UHC) offers its down payment assistance on conventional financing for buyers who meet income and credit requirements. The UHC FirstHome and HomeAgain programs both pair with conventional loans. You get up to 6% of the loan amount as a second mortgage for your down payment and closing costs.
Some county programs (Salt Lake County, Davis County) also allow conventional loans. The key question is always: does the DPA program's second mortgage meet conventional guidelines? We check this for every buyer we work with.
The Application Process: What to Expect
- Credit check and pre-approval: Pull your credit, review your debt-to-income ratio, and get a pre-approval letter. Most buyers complete this in 1–2 business days.
- Choose your program: Conventional 97, HomeReady, or Home Possible — we'll help you match based on your income and goals.
- Find your home: Shop with confidence. A conventional pre-approval is viewed favorably by sellers.
- Standard appraisal: No HUD checklist, no required repairs before closing. A standard appraisal verifies value.
- Underwriting: Lender verifies income, assets, and credit. Typically 2–3 weeks.
- Close: Sign documents, pay closing costs, get keys. Your first PMI payment is included in your first regular mortgage payment.
Bottom Line
Conventional loans are the right call for most Utah buyers with a 680+ credit score, stable income, and a home priced under $806,500. The math is simple: no upfront MI premium, lower long-term MI cost for good-credit buyers, and a PMI payment that eventually disappears — unlike FHA.
If your credit is 620–679 or your DTI is pushing 45%+, FHA may still be the better fit. We run the numbers for every buyer to make sure you're in the right loan for your actual situation — not just the loan that's easiest to sell.
Schedule a free consultation to see which loan type saves you more.