Virginia’s housing market in 2026 is not abstract. In Henrico County, median home prices have been running in the $390,000 to $430,000 range, according to Virginia REALTORS market data. Richmond, Chesterfield, Midlothian, and Fredericksburg tell similar stories: mid-tier suburban markets where buyers are transacting at price points that demand careful financing decisions. The conventional loan is the dominant financing instrument across all of these markets, and for good reason.
Understanding what a conventional loan actually requires, costs, and delivers is not optional knowledge for a Virginia homebuyer. It is foundational. This article is a factual, structured guide to conventional loan requirements, qualification standards, cost components, and how the product compares to FHA, VA, and USDA alternatives in Virginia-specific contexts.
One number worth anchoring to immediately: the 2026 conforming loan limit for most Virginia counties is $806,500, as set by the Federal Housing Finance Agency (FHFA). This figure defines the boundary between a conforming conventional loan and a jumbo loan, and it has direct implications for how buyers in Henrico, Chesterfield, Hanover, and similar markets are positioned. A $400,000 purchase sits comfortably inside that limit. A $900,000 purchase does not. That distinction matters for pricing, underwriting, and lender options.
This is an educational resource. It is not a sales pitch. The goal is to give you the data, the math, and the framework to make an informed decision about whether a conventional loan is the right tool for your Virginia home purchase or refinance in 2026.
The Mechanics Behind a Conventional Loan
A conventional loan is a mortgage that is not insured or guaranteed by a federal government agency. That distinguishes it from FHA loans (insured by the Federal Housing Administration), VA loans (guaranteed by the Department of Veterans Affairs), and USDA loans (backed by the U.S. Department of Agriculture). Conventional loans are originated by private lenders and, in most cases, sold to Fannie Mae or Freddie Mac on the secondary mortgage market. Because Fannie and Freddie purchase these loans, they set the eligibility guidelines that lenders must follow, which is why you will hear the term “conforming” used frequently.
A conforming conventional loan is one that meets Fannie Mae and Freddie Mac’s purchase criteria, including the loan amount limit. For 2026, the FHFA baseline conforming loan limit is $806,500 for a single-family home in most U.S. counties, including the majority of Virginia counties covered in this guide. You can verify the current limit at fhfa.gov. When a loan exceeds that threshold, it becomes a jumbo loan, which carries different underwriting requirements, typically stricter credit standards, larger reserve requirements, and different rate structures. Virginia buyers purchasing in higher-cost markets should review jumbo loan rates in Virginia before assuming a conforming product applies to their scenario.
Within conforming conventional loans, there are two primary structural types. The table below outlines the key differences:
30-Year Fixed-Rate: Rate is locked for the life of the loan. Monthly principal and interest payment never changes. Best suited for buyers who prioritize payment stability and plan to stay in the home long-term. Most common conventional loan type in Virginia suburban markets.
15-Year Fixed-Rate: Rate is locked for 15 years. Higher monthly payment than a 30-year, but significantly less total interest paid over the life of the loan. Best suited for buyers with strong cash flow who want to build equity faster and minimize interest cost.
5/1 ARM (Adjustable-Rate Mortgage): Rate is fixed for the first 5 years, then adjusts annually based on a benchmark index plus a margin. Initial rate is typically lower than a fixed-rate loan. Best suited for buyers who plan to sell or refinance within the fixed period and want to minimize short-term payment cost.
7/1 ARM: Rate is fixed for 7 years, then adjusts annually. Similar logic to the 5/1 ARM but with a longer initial fixed window. Suitable for buyers with a medium-term horizon who want rate stability beyond 5 years without committing to a full 30-year fixed rate.
The rate behavior distinction matters. With a fixed-rate loan, your payment is predictable regardless of what happens to interest rates in the broader market. With an ARM, your payment can increase after the fixed period ends, depending on index movement. For most Virginia buyers purchasing a primary residence in markets like Short Pump, Glen Allen, or Midlothian, the 30-year fixed remains the default choice because it eliminates rate uncertainty over a long holding period. Understanding your full range of home loan options in Virginia before committing to a loan structure is always worth the time.
Qualification Requirements: What Virginia Lenders Actually Look At
Conventional loan qualification comes down to four primary variables: credit score, debt-to-income ratio, reserves, and employment/income documentation. Each has defined thresholds that Fannie Mae and Freddie Mac require lenders to meet.
Credit Score Thresholds
The minimum credit score for a conventional conforming loan is 620, per Fannie Mae Selling Guide guidelines (source: fanniemae.com). However, qualifying at 620 is not the same as qualifying well. Conventional loan pricing uses a tiered structure called Loan-Level Price Adjustments (LLPAs), which means your credit score directly affects your interest rate and fees. Virginia homebuyers who want a deeper breakdown of how score ranges affect mortgage eligibility should review this guide on credit score requirements for a mortgage. The table below shows how score ranges generally map to rate-tier outcomes:
760 and above: Best available pricing tier. Lowest LLPAs applied. Access to the most competitive rate offers across lenders.
740 to 759: Near-best pricing. Minimal LLPA impact. Most borrowers in this range see rates very close to the top tier.
720 to 739: Moderate pricing adjustments begin. Still considered strong credit but some LLPA cost added depending on LTV.
700 to 719: Noticeable LLPAs applied. Rate will be measurably higher than the 740+ tier at the same loan terms.
680 to 699: Meaningful pricing adjustments. PMI cost may also increase at this range.
620 to 679: Qualifying range, but highest LLPAs applied. Borrowers in this tier may find FHA pricing more competitive once all costs are factored.
Debt-to-Income Ratio
Fannie Mae’s standard back-end DTI limit is 45%, with Desktop Underwriter (DU) automated approval sometimes extending to 50% with compensating factors (source: Fannie Mae Selling Guide B3-6-02). Back-end DTI includes all monthly debt obligations divided by gross monthly income. For a detailed breakdown of how Virginia lenders calculate your borrowing power using this metric, see this resource on debt-to-income ratio for mortgages.
Here is a worked example using a $400,000 Virginia home purchase with 10% down ($360,000 loan) at a hypothetical rate for illustration purposes only:
Assume a gross monthly income of $8,000. At 45% back-end DTI, the maximum total monthly debt load allowed is $3,600. If the estimated PITI (principal, interest, taxes, insurance) on the $360,000 loan is $2,200 per month, the borrower has $1,400 remaining for other recurring debts (car payments, student loans, minimum credit card payments). If total other debts are $1,200 per month, back-end DTI is ($2,200 + $1,200) / $8,000 = 42.5%, which qualifies. If other debts total $1,600 per month, DTI reaches 47.5%, which may require DU approval with compensating factors.
Reserve Requirements
For a primary residence purchase, conventional guidelines typically require 2 months of PITI in liquid reserves after closing. Using the same $400,000 example with an estimated PITI of $2,200 per month, the reserve requirement would be approximately $4,400 that must remain in verifiable accounts after the down payment and closing costs are paid. For investment properties, reserve requirements typically increase to 6 months of PITI, which on the same payment structure would mean approximately $13,200 in reserves.
Down Payment, PMI, and the True Cost of Entry
One of the most misunderstood aspects of conventional loans is the relationship between down payment size, private mortgage insurance, and total cost of ownership. The numbers are worth working through carefully.
Down Payment Options
Conventional loans allow down payments as low as 3% for qualifying first-time buyers through Fannie Mae HomeReady and Freddie Mac Home Possible programs (income limits apply; see fanniemae.com and freddiemac.com for current program details). Standard conventional loans allow 5% down for most buyers. Virginia buyers who want to explore all available paths to homeownership with minimal upfront capital should also review low down payment mortgage strategies that go beyond the standard conventional tiers. The table below uses a $400,000 Virginia purchase price for comparison. Note: monthly payment figures are illustrative only and do not represent current rate quotes. Contact a licensed lender for current rate-based calculations.
3% Down ($12,000 down / $388,000 loan): Lowest entry cost. PMI applies. Highest monthly payment among the tiers. Available through HomeReady/Home Possible with income qualification.
5% Down ($20,000 down / $380,000 loan): Standard minimum for most conventional borrowers. PMI applies. Monthly payment slightly lower than 3% down tier.
10% Down ($40,000 down / $360,000 loan): PMI still applies but at a lower rate due to reduced LTV. Meaningful reduction in PMI cost compared to 5% down.
20% Down ($80,000 down / $320,000 loan): No PMI required. Lowest monthly payment. Requires the largest upfront capital commitment.
How PMI Works
Private mortgage insurance applies to any conventional loan where the down payment is less than 20% of the purchase price. PMI is not a fixed cost. It is calculated as a percentage of the loan amount annually, typically ranging from approximately 0.5% to 1.5% depending on LTV ratio and credit score. On a $380,000 loan (5% down on a $400,000 purchase), PMI at a mid-range rate of roughly 0.8% annually would cost approximately $3,040 per year, or about $253 per month. At a higher rate of 1.2%, that same loan would carry approximately $4,560 per year in PMI, or $380 per month. Actual PMI rates vary by lender and borrower profile.
PMI can be removed once you reach 20% equity in the home, either through payment history or through a new appraisal supporting a higher value. Under the Homeowners Protection Act, lenders must automatically cancel PMI when the loan balance reaches 78% of the original purchase price based on the scheduled amortization.
PMI Breakeven Math: 5% Down vs. 20% Down
This is the calculation most buyers skip, and it is worth doing in detail.
Scenario: $400,000 Virginia home purchase. Option A is 20% down ($80,000). Option B is 5% down ($20,000).
The difference in upfront capital is $60,000. With Option B, you retain that $60,000 but you pay PMI until you reach 20% equity.
On a $380,000 loan at 5% down, reaching 20% equity ($80,000 in equity on a $400,000 home) means paying the loan balance down to $320,000. That is a reduction of $60,000 from the original $380,000 balance. On a standard 30-year amortization schedule, reaching that point takes approximately 8 to 10 years depending on the interest rate, assuming no extra payments and no appreciation-based refinance.
Using a conservative PMI rate of 0.8% annually on the declining loan balance, total PMI paid over 9 years is approximately: Year 1: $3,040 / Year 2: $2,990 / Year 3: $2,940 / Year 4: $2,885 / Year 5: $2,830 / Year 6: $2,770 / Year 7: $2,705 / Year 8: $2,640 / Year 9: $2,570. Approximate total PMI cost over 9 years: $25,370.
The question is whether that $60,000 in retained capital, if invested or kept liquid, generates more than $25,370 over the same period. At a conservative 4% annual return, $60,000 grows to approximately $85,400 over 9 years, generating roughly $25,400 in returns. At that rate, the breakeven is nearly identical. At higher returns, keeping the capital and paying PMI may be the better financial decision. At lower returns or if the capital is simply held in cash, the 20% down scenario may be more cost-efficient. The honest answer is that this calculation depends on your opportunity cost for that capital, not a universal rule.
Conventional vs. FHA, VA, and USDA: A Virginia-Specific Comparison
Choosing between loan types is not a question of which program is universally better. It is a question of which program fits your specific profile and geography. Here is a structured comparison across the four main options:
Conventional: Minimum credit score 620 (Fannie/Freddie guideline). Down payment as low as 3% with HomeReady/Home Possible. No upfront mortgage insurance. PMI required under 20% down; can be removed. Loan limit $806,500 for most Virginia counties (2026). Best for: buyers with 700+ credit, 10–20% down, stable W-2 income in suburban Virginia markets.
FHA: Minimum credit score 580 for 3.5% down; 500–579 with 10% down. Upfront MIP of 1.75% of loan amount. Annual MIP of 0.55% for most 30-year loans (verify current rates at hud.gov). MIP typically remains for the life of the loan with less than 10% down. Loan limits vary by county. Best for: buyers with lower credit scores or limited down payment who do not qualify for VA or USDA. Virginia buyers weighing this decision should review a detailed FHA vs. conventional loan comparison before committing to either path.
VA: No minimum credit score set by VA (lenders typically require 580–620). No down payment required. No PMI. Funding fee applies (waived for some veterans). No loan limit for full entitlement borrowers. Best for: eligible veterans, active-duty service members, and qualifying surviving spouses. Particularly relevant in Hampton Roads, Williamsburg, Yorktown, and other military-adjacent Virginia communities. Eligible borrowers should explore VA loan benefits in full before defaulting to a conventional product.
USDA: No down payment required. Upfront guarantee fee and annual fee apply. Income limits and geographic eligibility restrictions. Best for: buyers in eligible rural Virginia areas including parts of Goochland, Louisa, Caroline County, and areas around Lake Anna. Verify current USDA eligibility maps at eligibility.sc.egov.usda.gov.
When Conventional Pricing Beats FHA
For a borrower with a 700+ credit score and 5% down, a direct comparison of FHA vs. conventional reveals an important cost difference. On a $400,000 purchase, FHA’s upfront MIP of 1.75% adds $6,825 to the loan balance at closing. The annual MIP of 0.55% on a $386,825 loan (after rolling in the upfront MIP) is approximately $2,128 per year, or $177 per month, and it stays for the life of the loan with 3.5% down. Conventional PMI at 0.8% on a $380,000 loan is approximately $253 per month but is removable at 20% equity. The conventional PMI is higher monthly in the early years but disappears. The FHA MIP does not. For a borrower with strong credit who plans to stay in the home beyond the PMI removal point, conventional is typically the lower total-cost option.
Rate Shopping in Virginia: How the Process Actually Works
Conventional mortgage rates are not a single number. They are a base rate adjusted by Loan-Level Price Adjustments (LLPAs) that Fannie Mae and Freddie Mac apply based on your specific loan profile. LLPAs are determined by your credit score, loan-to-value ratio, property type, occupancy status, and loan purpose. Two borrowers can receive the same quoted interest rate from the same lender and have entirely different underlying cost structures, because one borrower’s LLPAs are being absorbed into the rate while the other’s are being charged as points at closing. Using a mortgage payment calculator can help you model how different rate and fee combinations affect your actual monthly obligation before you commit to any lender.
This is why comparing Annual Percentage Rate (APR) across lenders, not just the interest rate, is essential. APR incorporates fees and points into a single comparable figure.
The Multi-Lender Approach
The CFPB recommends shopping multiple lenders for a mortgage, and their guidance confirms that multiple mortgage credit inquiries within a 45-day window are treated as a single inquiry for FICO scoring purposes (source: consumerfinance.gov). This means you can apply to multiple lenders during that window without compounding damage to your credit score. Virginia homebuyers who want a structured approach to this process should read this guide on mortgage rate comparison strategies before beginning formal applications.
A mortgage broker who has access to multiple wholesale lenders can present rate options from many sources simultaneously, which is structurally different from applying directly to a single retail lender like Rocket Mortgage, Movement Mortgage, PrimeLending, CapCenter, or Alcova Mortgage. Each of those lenders offers their own products at their own pricing. A broker accesses many of those pricing channels at once. This is a factual structural difference, not a quality judgment about any individual lender. The practical implication is that a borrower using a broker may see a wider range of rate and fee combinations in a single conversation.
No-Touch Credit Pre-Qualification
One tool worth understanding before you begin rate shopping is the soft-pull pre-qualification. Using Vantage Score 4.0, a lender can run a soft credit inquiry that shows your credit profile and approximate score without triggering a hard inquiry on your credit report. This allows you to see rate scenarios and loan eligibility before committing to a formal application. Buyers who want to understand how to protect their credit throughout this process should review this guide on shopping for a mortgage without hurting your credit.
An important distinction: Vantage Score 4.0 is a different scoring model from the FICO scores used in formal mortgage underwriting. Your Vantage Score may differ from your FICO score. The soft-pull pre-qualification is a useful planning tool, not a final underwriting determination. It gives you a realistic picture of where you stand before any hard inquiries are placed, which is particularly valuable when you are comparing offers from multiple Virginia lenders early in your home search.
Frequently Asked Questions: Conventional Loans in Virginia
Q: What is the minimum credit score for a conventional loan in Virginia?
A: The minimum credit score for a conventional conforming loan is 620, per Fannie Mae and Freddie Mac guidelines. However, scores below 700 will face meaningful Loan-Level Price Adjustments that increase your effective rate. Scores of 740 and above access the best pricing tiers.
Q: What is the conforming loan limit for Virginia in 2026?
A: The FHFA-set conforming loan limit for most Virginia counties in 2026 is $806,500 for a single-family home. Loans above this amount are classified as jumbo loans and carry different underwriting requirements. Verify the current limit at fhfa.gov.
Q: When can I remove PMI from a conventional loan?
A: PMI can be removed once you reach 20% equity in your home. You can request cancellation when your loan balance reaches 80% of the original purchase price through scheduled payments. Under the Homeowners Protection Act, lenders must automatically cancel PMI when the balance reaches 78% of the original value. You may also request removal earlier if a new appraisal supports a higher current value that establishes 20% equity.
Q: Is a conventional loan or FHA loan better for a first-time buyer in Richmond?
A: It depends on your credit score and down payment. If your credit score is 700 or above and you can put down 5–10%, conventional pricing is often more favorable once you factor in FHA’s upfront MIP of 1.75% and lifetime annual MIP. If your credit score is below 660 or you have limited down payment funds, FHA may offer more accessible qualification terms. Run both scenarios with actual rate quotes before deciding.
Q: Can a conventional loan be used for an investment property in Virginia?
A: Yes. Conventional loans can be used for investment properties, though the requirements are stricter than for primary residences. Expect a minimum 15–25% down payment, higher credit score requirements, and reserve requirements of 6 months PITI or more. LLPAs for investment properties are also higher, which affects pricing.
Q: How is Better Mortgage Rates different from Rocket Mortgage or Movement Mortgage for a conventional loan in Virginia?
A: Rocket Mortgage, Movement Mortgage, and similar lenders are retail or direct-to-consumer lenders that offer their own loan products at their own pricing. Better Mortgage Rates, through Duane Buziak, operates as a mortgage broker with access to hundreds of wholesale lenders simultaneously. This means a single pre-qualification conversation can surface rate and fee options from multiple lenders, rather than a single institution’s product set. Neither model is universally superior; the value depends on your specific loan profile and which lenders offer the most competitive pricing for your scenario.
Q: What are typical closing costs for a conventional loan in Virginia?
A: Closing costs in Virginia typically range from 2% to 5% of the purchase price. On a $400,000 purchase, that is $8,000 to $20,000. This includes lender origination fees, title insurance, recording fees, prepaid interest, homeowner’s insurance escrow, and property tax escrow. Virginia also charges a grantor’s tax and recordation taxes, which vary by locality. Always request a Loan Estimate from your lender, which itemizes all closing costs in a standardized format required by federal law.
Q: How long does conventional loan approval take?
A: A conventional loan can close in as few as 15 to 21 days with complete documentation and no appraisal complications. More typical timelines run 30 to 45 days. Having your documents ready, including W-2s, recent pay stubs, two years of tax returns, bank statements, and photo ID, accelerates the process significantly.
Putting It All Together: Your Next Step Toward a Virginia Conventional Loan
The conventional loan decision framework comes down to four variables working together: your credit score tier, your down payment amount, your DTI position, and your loan amount relative to the $806,500 conforming limit for most Virginia counties.
If your credit score is 700 or above, your DTI is below 45%, you have 5–20% down, and your purchase price falls within the conforming limit, you are likely well-positioned for conventional financing. If your credit score is below 660, your DTI is tight, or your down payment is minimal, it is worth running a side-by-side comparison with FHA before committing to a loan type. If you are a veteran purchasing in Hampton Roads, Williamsburg, Yorktown, or anywhere in Virginia, a VA loan comparison is always warranted. If you are purchasing in a rural Virginia county like Goochland, Louisa, or Caroline County, check USDA eligibility before assuming conventional is your only path.
The logical first step, before any of those decisions are finalized, is a no-touch credit pre-qualification using Vantage Score 4.0. It gives you real numbers, a real rate scenario, and a clear picture of your position without a hard inquiry affecting your credit score. You can then take that information into a formal rate shopping process with confidence.
To start that process, Learn more about our services and connect with Duane Buziak, Mortgage Maestro, NMLS #1110647, at Better Mortgage Rates for a personalized conventional loan review. With access to hundreds of lenders and a no-credit-impact pre-qualification process, the goal is to give you the complete picture before you commit to anything.
