When most people picture a mortgage, they are picturing a conventional loan. It is the default, the standard, the thing people mean when they do not specify anything else. But in Los Angeles, where prices push most buyers into more complex territory, understanding what conventional actually means and how it plays out in this market is worth your time.
A conventional mortgage is any home loan that is not backed by a federal government agency. That simple definition separates it from FHA loans (backed by the Federal Housing Administration), VA loans (backed by the Department of Veterans Affairs), and USDA loans (backed by the Department of Agriculture). Use the mortgage calculator to compare what a conventional loan payment would look like at your target price.
Conforming vs Non-Conforming: The Key Distinction
Within conventional loans, there are two sub-categories that matter a great deal in LA:
Conforming loans meet the purchasing guidelines set by Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy most mortgages from lenders. In 2026, the baseline conforming loan limit is $806,500. LA County is a high-cost area, so it qualifies for high-balance conforming loans up to $1,209,750. Loans within these limits can be sold to Fannie or Freddie, which gives lenders liquidity and lets them offer competitive rates.
Non-conforming loans are above those limits or otherwise outside Fannie and Freddie guidelines. The most common type is a jumbo loan, which covers amounts above $1,209,750 in LA County. Jumbo loans have their own underwriting standards and are held by the lender or sold to private investors rather than to Fannie or Freddie.
Credit Score Requirements for Conventional Loans in 2026
Conventional loans have stricter credit score requirements than FHA. The minimum to qualify through most lenders is 620, and to get the best pricing, you generally want to be above 740. Here is how scores affect your rate:
| Credit Score Range | Typical Rate Impact | Notes |
|---|---|---|
| 760 and above | Best rates available | Ideal tier for conventional |
| 720 to 759 | Slightly higher | Still very competitive |
| 680 to 719 | Moderate pricing adjustment | PMI cost also increases |
| 640 to 679 | Noticeable increase | FHA may compete at this range |
| 620 to 639 | Significant adjustment | Compare FHA carefully |
This is one of the core reasons first-time homebuyers in LA need to look at both conventional and FHA side by side. For borrowers with scores below 680, FHA often offers better total cost even with its mortgage insurance, because the rate adjustment on conventional can be substantial.
Down Payment Options on Conventional Loans
Conventional loans offer several down payment tiers:
3 percent down is available for first-time buyers through specific programs like Fannie Mae HomeReady and Freddie Mac Home Possible. These programs have income limits and require a homebuyer education course, but they make conventional accessible with minimal down payment.
5 percent down is the standard starting point for most conventional loans without income-limit restrictions. PMI applies below 20 percent down.
10 percent down reduces PMI costs significantly and opens up more pricing tiers on the rate.
20 percent down eliminates PMI entirely. In LA, 20 percent on a $900,000 property is $180,000, which is a significant barrier but worth planning toward if you can.
How Conventional Differs from FHA in Practice
The practical differences between conventional and FHA come down to four things: credit scoring sensitivity, mortgage insurance structure, property flexibility, and the path to removing insurance.
On credit, FHA is more forgiving at the lower end. On insurance, FHA has mandatory MIP that does not automatically cancel for most 30-year loans, while conventional PMI cancels once you reach 20 percent equity. On property, conventional has no equivalent of the FHA minimum property standards, so distressed properties that an FHA appraiser would flag are easier to finance conventionally. On flexibility, conventional allows for second homes and investment properties, while FHA requires primary residence.
For buyers who need jumbo financing above $1,209,750 in LA, conventional is the path since FHA does not go above that limit.
Income and DTI Requirements
Conventional loans generally allow DTI ratios up to 45 percent, and automated underwriting can approve higher ratios with compensating factors like strong reserves or high credit scores. There is no income cap on conventional loans, and there is no income floor either. The requirement is that income be documentable, stable, and sufficient to support the payment.
Income types that work well for conventional: W-2 employment, self-employment (typically documented with two years of tax returns), rental income with proper documentation, and investment income. For self-employed borrowers, conventional through bank statement programs or non-QM loans can work when traditional tax returns show lower income than you actually earn.
When Conventional Makes Sense in Los Angeles
Conventional is often the stronger choice when: your credit score is above 720, you can put 10 to 20 percent down, you are buying a property that FHA might flag (needs work or is being sold as-is), you plan to buy a second home or investment property, or you need a loan above the FHA limit.
It is often not the best choice when: your credit is below 680, you have a higher DTI with limited reserves, you want maximum flexibility on the down payment with minimum credit requirements, or you are buying in an FHA-approved condo project and FHA would give you a better rate.
Pricing and Loan Level Price Adjustments
One complexity of conventional loans is Loan Level Price Adjustments (LLPAs), which are fees that vary based on credit score, LTV (loan-to-value ratio), and loan purpose. They are typically expressed as a percent of the loan amount and reflected in the rate. A borrower with a 740 credit score at 80 percent LTV has very few LLPAs. A borrower with a 680 score at 95 percent LTV has more, and those costs add up.
Understanding LLPAs is part of why getting a specific rate quote based on your actual profile matters more than checking published average rates. The average does not apply to you specifically.
Conclusion
A conventional mortgage is the most flexible mortgage tool available in Los Angeles for buyers who have reasonable credit and some down payment saved. In 2026, with LA County high-balance limits at $1,209,750, conventional handles the vast majority of LA home purchases. For buyers with strong credit, it typically offers better long-term costs than FHA because PMI cancels and LLPAs are minimal.
The right answer depends on your specific credit profile, down payment, and the property you are buying. Book a call and we can run your actual numbers across both conventional and FHA to see which makes more sense for your situation.
Frequently Asked Questions
Is a conventional loan better than FHA in Los Angeles?
It depends on your credit and down payment. With a score above 720 and 10 to 20 percent down, conventional is usually better because PMI eventually cancels and rates are competitive. With scores below 680 and less than 10 percent down, FHA often wins on total cost.
Can I get a conventional loan with a 600 credit score?
Most lenders require a minimum of 620 for conventional loans. At 600, you would likely need to look at FHA or work on improving your score before applying. Some non-QM lenders can work at lower scores but with different pricing.
What is the maximum conventional loan amount in LA County in 2026?
The high-balance conforming limit in LA County is $1,209,750. Above that, you are looking at a jumbo loan, which has its own guidelines and is still a type of conventional loan but is not conforming.
Do conventional loans have income limits?
Standard conventional loans have no income limits. However, programs like HomeReady and Home Possible do have income limits tied to area median income. Those limits exist to make sure the lower down payment programs serve buyers who need them.
Can I use a conventional loan for a rental property?
Yes. Conventional loans can be used for second homes and investment properties, while FHA requires primary residence occupancy. Investment property loans have different down payment requirements and higher rates than primary residence loans.