Conventional Loans in Minnesota

Who a conventional loan usually fits

Conventional is the right starting point for most Minnesota buyers with a reasonable credit profile, and the reason is mortgage insurance. Private mortgage insurance is priced off your score and equity, it stops entirely at 20% equity, and it comes off without refinancing — a structural advantage over an FHA annual premium that, on a minimum-down loan, lasts the life of the loan.

It is also the only major program that works for property you will not live in: second homes, cabins, and one- to four-unit rentals are conventional territory, while FHA, VA, and USDA all require occupancy. Where conventional gets harder is thin or bruised credit, since automated underwriting is less forgiving on recent derogatory events and mortgage insurance gets expensive quickly as scores drop. A borrower in the high 500s with minimal down payment is usually better served by FHA, and an eligible veteran by VA.

Conventional requirements at a glance

Credit score

620 is the floor at most wholesale lenders. Pricing and mortgage insurance costs improve in tiers above that, with meaningful breaks near 680, 720, and 760. Unlike FHA, where the score mainly opens the door, on conventional it keeps affecting cost after you qualify.

Down payment

3% is available to qualified first-time buyers through Fannie Mae HomeReady and Freddie Mac Home Possible, both carrying area-based income limits and a homebuyer education requirement. Standard conventional purchases start at 5%. Second homes require more, and investment property more still.

Debt-to-income ratio

Automated underwriting commonly accepts total DTI up to 45%, and up to 50% with strong compensating factors such as reserves, a large down payment, or a high score. It is an underwriting output rather than a bright line.

Occupancy

Primary residence, second home, or investment property — flexibility unique among the major programs.

Property type

One- to four-unit homes, condominiums subject to project review, and planned unit developments. Condo eligibility — reserves, owner-occupancy ratios, litigation, insurance — is its own review, worth checking before you offer on a metro condo.

Private mortgage insurance, and how it ends

Private mortgage insurance protects the lender when you put less than 20% down. The premium is set by the mortgage insurance company based on your score, loan-to-value, loan type, and occupancy, so unlike FHA there is no single published rate and two borrowers with the same down payment can pay quite different amounts.

The important part is that it ends. Under the federal Homeowners Protection Act a servicer must terminate borrower-paid PMI automatically when the balance reaches 78% of original value on the amortization schedule, and you can request cancellation at 80% loan-to-value if payments are current and the servicer's conditions are met. Many servicers will consider a request supported by a new appraisal after appreciation or improvements, though accepting one is their decision.

There are also structural alternatives: single-premium PMI paid at closing, lender-paid PMI built into the rate, and split-premium arrangements. Each shifts cost between closing and monthly, and which is cheapest depends on how long you keep the loan. That comparison is worth doing explicitly rather than defaulting to monthly PMI because it is the standard option.

The 2026 conforming loan limit in Minnesota

The Federal Housing Finance Agency announced that the 2026 conforming loan limit for one-unit properties is $832,750 in most of the United States, an increase of $26,250 over 2025, with higher limits for two- to four-unit property. No Minnesota county is designated high-cost, so $832,750 is the one-unit limit statewide, from Hennepin and Ramsey to the smallest rural county.

That number is the boundary between conforming and jumbo. At or below it, a loan can be delivered to Fannie Mae or Freddie Mac under published guidelines; above it, the rules come from individual investors instead. Because the limit rose, some 2026 Minnesota purchases that would have needed a jumbo loan a year earlier now fit inside conforming guidelines — usually a simpler file with lower down payment options. In practice the limit binds in the metro and in lake-country markets where prices have run ahead of the state median, and sits well above what most greater-Minnesota buyers borrow.

What to prepare, and common missteps

• Look at the mortgage insurance quote, not just the rate. On a low-down-payment loan, PMI pricing can move the monthly cost more than a modest rate difference.
• Ask whether you qualify for HomeReady or Home Possible; both treat mortgage insurance more favorably than standard conventional at the same down payment.
• Document large deposits as you go. Reconstructing a three-month-old deposit is unpleasant.
• If you are close to 20% equity, ask what it takes to get there. Crossing that line removes PMI entirely.

How Davis Monroe Financial fits in

Davis Monroe Financial, LLC is a licensed Minnesota mortgage broker, not a lender. We do not underwrite, approve, or fund loans. On conventional files the useful work is comparison: the same borrower profile prices differently across wholesale lenders, mortgage insurance structures change the answer, and HomeReady or Home Possible eligibility can beat a standard conventional structure outright. The wholesale lender underwrites the file and makes the credit decision.