Conventional Loans in San Diego: Requirements, Limits & How to Apply (2026)

What Is a Conventional Loan?

A conventional loan is any mortgage that is not insured or guaranteed by a federal government agency. Unlike FHA loans (backed by the Federal Housing Administration) or VA loans (backed by the Department of Veterans Affairs), conventional loans are originated and held entirely by private lenders — banks, credit unions, and mortgage companies.

Most conventional loans follow the guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that purchase mortgages from lenders. Loans that meet these guidelines are called conforming loans, and they come with standardized underwriting rules, down payment options, and loan limits.

Conventional loans are the most common mortgage type in the United States. They are popular with buyers who have solid credit and enough savings for a meaningful down payment, because they offer more flexibility on property types, fewer restrictions on loan terms, and the ability to drop mortgage insurance once you build sufficient equity.

Who Qualifies for a Conventional Loan?

Conventional loan requirements are generally stricter than FHA or VA guidelines, but they are achievable for many first-time buyers. Here is what lenders typically look for:

Credit Score

Most conventional loan programs require a minimum credit score of 620. However, your score affects more than just approval — it directly impacts your interest rate and private mortgage insurance costs. Borrowers with scores above 740 generally receive the most competitive pricing. If your score is below 620, you may want to consider an FHA loan while you work on improving your credit.

Down Payment

Conventional loans offer a range of down payment options, from as little as 3% up to 20% or more. The amount you put down determines whether you need private mortgage insurance (PMI) and how much equity you start with.

Debt-to-Income Ratio

Fannie Mae and Freddie Mac generally prefer a total debt-to-income ratio of 36% to 43%. With strong compensating factors — such as significant cash reserves or a very high credit score — some lenders will approve ratios up to 50%, though this is less common than with FHA loans.

Employment and Income

You will need to provide two years of employment history and stable income documentation. W-2 employees should have recent pay stubs and tax returns. Self-employed borrowers need two years of personal and business tax returns plus a year-to-date profit-and-loss statement.

Conventional Loan Limits in San Diego

The conforming loan limit for San Diego County in 2026 is $766,550 for a single-family home. This is the maximum loan amount that Fannie Mae and Freddie Mac will purchase, and it applies to most conventional mortgages.

If you need to borrow more than the conforming limit, you enter jumbo loan territory. Jumbo loans typically require higher credit scores (700+), larger down payments (10-20%), and have stricter underwriting. Given San Diego's median home price of roughly $900,000, many buyers in the county will need either a significant down payment to stay under the conforming limit or a jumbo loan to cover the full purchase price.

One strategy: pair a conforming first mortgage with a down payment assistance program or a second lien (piggyback loan) to avoid jumbo loan requirements. Talk to a local lender about which approach works best for your price range.

Down Payment Options

Conventional loans give you several down payment tiers, each with different trade-offs:

Conventional 97

The Conventional 97 program, offered through Fannie Mae (HomeReady) and Freddie Mac (Home Possible), allows just 3% down for first-time homebuyers. Both programs have income limits — typically 80% of the area median income — but they provide an affordable entry point with competitive PMI rates for qualifying buyers.

Private Mortgage Insurance (PMI)

If you put down less than 20%, your lender will require PMI. The cost depends on your credit score, loan amount, and down payment percentage. For a buyer with a 720 credit score putting 5% down on a $700,000 loan, PMI might run roughly $150 to $250 per month. These are estimates only — your lender can provide an exact quote.

The good news: unlike FHA mortgage insurance, conventional PMI is removable. Once your loan balance drops to 80% of the home's original appraised value, you can request cancellation. At 78%, your servicer must automatically remove it. This is a significant long-term advantage over FHA loans.

Pros and Cons of Conventional Loans

Conventional vs. FHA Loans

This is the most common comparison for San Diego first-time buyers. Here is how the two stack up:

The crossover point: if your credit score is 680 or higher and you can put at least 5% down, a conventional loan often costs less over time than FHA because you can eventually drop PMI. Below 680, FHA's more lenient underwriting and lower rates may offset the permanent mortgage insurance.

Also consider the loan limit difference. FHA's $1,077,550 limit covers more of San Diego's housing stock than the $766,550 conforming limit. If you are shopping above $766,550 and want to avoid a jumbo loan, FHA may be the better route.

How to Apply for a Conventional Loan in San Diego

1. Review your credit report. Check for errors and pay down revolving balances if possible. Even a 20-point credit score improvement can meaningfully reduce your interest rate and PMI costs on a conventional loan.
2. Determine your down payment. Decide how much you can realistically put down. Remember that closing costs (typically 2-5% of the loan amount) are separate from the down payment.
3. Compare lenders. Get quotes from at least three lenders, including both local and national options. Compare the annual percentage rate (APR), which includes both the interest rate and fees, for the most accurate cost comparison.
4. Get pre-approved. A pre-approval from a reputable lender strengthens your offer in San Diego's competitive housing market. Most pre-approvals are valid for 60 to 90 days.
5. Find your home and make an offer. Work with a buyer's agent who understands the local market. Unlike FHA or VA, conventional loans have fewer property restrictions, giving you a wider range of options.
6. Complete the appraisal and underwriting. Your lender will order a standard appraisal. Conventional appraisals are generally less stringent than FHA appraisals, which means fewer repair requirements.
7. Close and move in. Most conventional loans close in 30 to 40 days. Your lender will give you a Closing Disclosure at least three business days before closing with your final numbers.

Down Payment Assistance Programs That Work with Conventional Loans

Several local and state DPA programs are compatible with conventional first mortgages:

San Diego Housing Commission (SDHC)

SDHC programs offer deferred-payment assistance to first-time buyers purchasing within the City of San Diego. These programs can often be paired with a conventional first mortgage to reduce your upfront costs.

CalHFA Conventional Programs

CalHFA offers its own conventional first mortgage product with below-market rates, plus the MyHome Assistance Program, which provides a deferred junior loan of up to 3% of the purchase price for conventional borrowers. The ZIP Extra program can also help with closing costs.

GSFA Platinum

GSFA's down payment assistance pairs with conventional loans and offers up to 5.5% of the loan amount as a gift or repayable second. Income limits apply, but the program is broadly available throughout San Diego County.

Fannie Mae HomeReady and Freddie Mac Home Possible

These are not DPA programs per se, but they are conventional loan products designed for lower-income first-time buyers. They allow 3% down, accept DPA funds for the down payment, and feature reduced PMI rates. In San Diego, the income limit is typically 80% of the area median income.

Frequently Asked Questions About Conventional Loans in San Diego

Ready to Explore Conventional Loans in San Diego?

A conventional loan gives you flexibility, the ability to drop PMI, and access to a wide range of property types. If you have solid credit and some savings, it can be the most cost-effective mortgage option over the long term. The next step is talking to a local lender who can compare conventional scenarios with FHA and other programs side by side.