The 620 rule and its three exceptions
- Standard lane (620+): first-time buyers from 3% down, 5% standard, within conforming limits; cash-out to 80% LTV on a primary home and 75% on an investment property
- Exception 1 — purchase, owner-occupied: below 620, it proceeds with 20% or more down
- Exception 2 — purchase, investment: below 620, it proceeds with 30% or more down
- Exception 3 — refinance: below 620, the existing balance must be under 65% of the appraised value. Above that line it's a decline
After a decline, the pivots are FHA, which accepts below-620 refinances at any LTV, or a home equity agreement on a primary home in an eligible state. These exceptions are underwritten case by case.
The PMI advantage
- Conventional mortgage insurance can be removed at 20% equity, and there is none at all at 80% LTV or below
- FHA insurance at maximum LTV lasts the life of the loan
- Borrowers who qualify for both usually do better conventional; those who start with FHA often refinance to conventional once equity and credit allow
Joshua runs both quotes side by side to show where the crossover is.
The program in plain numbers
- Standard minimum credit
- 620
- Below-620 purchase (owner-occupied)
- Proceeds with 20%+ down
- Below-620 purchase (investment)
- Proceeds with 30%+ down
- Below-620 refinance
- Proceeds with the balance under 65% of appraised value
- Down payment at 620+
- From 3% (first-time buyers); 5% standard
- Mortgage insurance
- Removable at 20% equity; none at 80% LTV or below
- Cash-out refinance
- 80% LTV primary; 75% investment
- Where offered
- 29 states
Good to know.
Can I get a conventional loan below 620?+
Sometimes: a purchase with 20% or more down (owner-occupied) or 30% or more down (investment), or a refinance with the balance under 65% of appraised value. Otherwise FHA or a home equity agreement.
Conventional or FHA?+
If you qualify for both, conventional usually wins on insurance: PMI is removable at 20% equity and absent at 80% LTV, while FHA insurance at maximum LTV lasts the life of the loan. FHA wins on a 3.5% down payment and more flexible underwriting.
How much does a first-time buyer need to put down?+
From 3% at 620 and above; 5% is standard otherwise. Conforming loan limits apply.
When does PMI come off?+
It's removable at 20% equity, and there's none from day one at 80% LTV or below.
Can I do a conventional cash-out?+
Yes, up to 80% LTV on a primary home and 75% on an investment property, at 620 and above. Below 620, the refinance exception applies: the balance must be under 65% of value.
Does checking my options hurt my credit?+
No. It's a soft review only; a hard inquiry comes later, with your permission.