Conventional Loans in Florida: 3% Down, PMI That Actually Cancels

What Is a Conventional Loan?

A conventional loan is a mortgage that follows the guidelines of Fannie Mae and Freddie Mac — the two government-sponsored enterprises that buy most U.S. mortgages from lenders and bundle them into securities. It isn’t insured by the government the way FHA, VA, and USDA loans are. When the loan amount stays within the conforming loan limits, it’s called a conforming conventional loan — and that’s what the vast majority of Florida buyers use.

In plain English: the conventional loan is the standard mortgage. It rewards good credit with better pricing, it lets you put down as little as 3%, and — unlike FHA — its mortgage insurance cancels. It never lasts the life of the loan.

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Who the Conventional Loan Is For

• Buyers with 620+ credit who want pricing that rewards their score instead of ignoring it.
• Buyers putting 5–20% down — the sweet spot where conventional usually beats FHA on monthly payment.
• Anyone who hates lifetime mortgage insurance — conventional PMI drops off. FHA’s MIP (with minimum down) doesn’t.
• Second-home and investment buyers — conventional is the primary path for non-primary residences.
• Anyone told “no” by a bank — one lender’s overlay is never the last word. As a Mortgage Broker with access to roughly 200 lending partners, Douglas places conventional files banks turn away.

If that sounds like you, don’t talk yourself out of buying before you have real numbers. Apply and find out where you actually stand.

2026 Conforming Loan Limits (What You Can Borrow)

The Federal Housing Finance Agency (FHFA) sets conforming limits each year. For 2026, the baseline one-unit limit is $832,750 in most U.S. counties — including every county in Northeast Florida. Loans above that amount are jumbo loans.

Area	1-Unit Limit
Most U.S. counties (baseline) — incl. Duval, St. Johns, Clay, Nassau & Baker	$832,750
High-cost areas (ceiling)	$1,249,125

Limits apply to the loan amount, not the purchase price. On a $900,000 purchase with 10% down, the $810,000 loan is still conforming.

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Down Payment Options: 3%, 5%, 10%, 20%

3% down. Fannie Mae’s and Freddie Mac’s 97%-LTV programs allow 3% down on a primary residence — first-time buyers qualify broadly, and programs like HomeReady and Home Possible extend 3% down to low-to-moderate-income buyers (including repeat buyers) with reduced mortgage insurance pricing. On a $400,000 Jacksonville home, 3% is $12,000.

5% down. The standard low-down conventional option with no income limits and no first-time-buyer requirement.

10%+ down. Better pricing, lower PMI, and at 20% down there’s no mortgage insurance at all.

Gift funds. The full down payment can be a gift from family on a primary residence — and unlike FHA, conventional also allows gifts from a broader set of donors in many cases.

PMI: The Rules, the Cost, and How It Goes Away

Private mortgage insurance (PMI) is required on conventional loans above 80% loan-to-value. Here’s what the agencies’ actual rules say:

• No upfront fee. Unlike FHA’s 1.75% upfront premium, conventional PMI has no financed lump sum — it’s purely monthly (or lender-paid).
• It’s priced on your credit. PMI rates run roughly 0.2% to over 1% per year depending on credit score and down payment. A 760 score with 10% down pays far less than a 640 score with 3% down. This is the single biggest reason strong-credit buyers do better with conventional than FHA.
• It cancels. Under the Homeowners Protection Act, PMI automatically terminates at 78% LTV based on the original amortization schedule. You can request cancellation at 80% LTV — including with a new appraisal showing the home gained value. It never lasts the life of the loan.
• Lender-paid MI. Some lenders offer to pay the PMI in exchange for a slightly higher rate — useful if you’d rather have a clean payment with no MI line item.

The bottom line: conventional PMI is temporary by law. FHA’s MIP, with minimum down, is for the life of the loan. That difference alone is worth running both scenarios.

What Conventional Actually Costs: LLPAs Explained Simply

Fannie Mae and Freddie Mac price loans with loan-level price adjustments (LLPAs) — upfront adjustments based on credit score, down payment, occupancy, and loan purpose. Think of it as the agencies’ risk menu:

• Higher score + bigger down = lower adjustment. A 780 score with 20% down has minimal LLPAs. A 640 score with 3% down carries meaningful ones — usually absorbed into the rate.
• Cash-out refinances, investment properties, and second homes carry their own LLPA hits — investment pricing is notably higher than primary-residence pricing.
• The 2023 LLPA rework narrowed the gap between high and low scores, which is one reason mid-credit buyers should price conventional before assuming FHA wins.

You don’t need to memorize the matrix — that’s Douglas’s job. What matters is the principle: with conventional, your credit earns you something. With FHA, a 780 and a 580 get the same rate and the same MIP.

Conventional Eligibility Requirements

• Credit: 620 is the standard minimum for Fannie Mae and Freddie Mac. Many lenders overlay 640–680 — those are bank rules, not agency rules.
• Income & employment: Two years of documentable earnings is the standard. Self-employed borrowers use two years of tax returns; the agencies allow as little as one year with strong compensating factors.
• Debt-to-income: 45% is the standard ceiling with automated underwriting approval (DU/LP); up to 50% is allowed with strong compensating factors like reserves and excellent credit.
• Reserves: Not always required for primary residences, but 2–6 months of reserves strengthen the file — and second homes and investment properties require them.
• Property: Primary residences, second homes, and 1–4 unit investment properties all qualify, with higher down payments for non-primary occupancy (typically 10% for second homes, 15–25% for investment).

A note on overlays: everything above is the agencies’ actual guidelines. Banks routinely add their own floors — higher minimum scores, extra reserve demands, lower DTI caps. Douglas brokers conventional through wholesale lenders that follow the actual guidelines. If a bank said no, that was one lender’s answer, not Fannie Mae’s.

Conventional vs. FHA vs. VA vs. USDA

Not sure conventional is your fit? Quick rules of thumb:

• Eligible veteran? Look at the VA loan first — 0% down and no monthly MI usually beats conventional on payment.
• Eligible area + modest income? USDA’s 0% down and low fees often beat both conventional and FHA on payment.
• Lower credit or minimum cash? FHA’s 3.5% down and score-blind pricing can win for 580–660 scores with small down payments.
• 680+ credit with 5%+ down? Conventional usually wins — better PMI pricing, cancellable MI, and no upfront premium.

VA Loans — 0% Down, No PMI FHA Loans — 3.5% Down USDA Loans — 0% Down

Douglas runs all four side by side on your real numbers before you choose — never pick on the loan name alone.

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