A Conventional loan is a mortgage that is not backed by a government agency, instead, it’s issued by a private lender. This type of mortgage follows the requirements and limits set by Fannie Mae and Freddie Mac, which are government sponsored entities, that buy and sell mortgages. This is the most common type of mortgage done today. One of the main advantages of this type of loan is the ability to avoid paying private mortgage insurance (PMI) if you can put 20% down, although, generally, minimum down payment for qualification is only %5 (3% if you’re a first-time buyer).

The cost of PMI is determined by a few factors; mainly credit score, debt to income ratio, and percentage of down payment. Therefore, someone who is putting 10% down, has a 760 credit score, and a 30% debt to income ratio will pay less PMI than a person putting 5% down, has a 680 credit score, and a 46% debt to income ratio.