Conventional Loans in Utah: Rates, Requirements, and How to Apply

What Is a Conventional Loan?

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

Most conventional loans in Utah are conforming loans, meaning they meet the guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that purchase mortgages from lenders. Because these loans can be sold to Fannie or Freddie, lenders can offer competitive interest rates and more flexible terms.

Conventional loans are the most widely used mortgage type in the United States, accounting for roughly 80% of all new home loans. In Utah specifically, they dominate the market because the state's median home price falls well within conforming loan limits, and Utah buyers tend to have higher-than-average credit scores.

Requirements for a Conventional Loan in Utah

Qualifying for a conventional mortgage in Utah is straightforward if you understand the four main pillars lenders evaluate: credit score, debt-to-income ratio, down payment, and employment history.

Credit Score

The minimum credit score for a conventional loan is 620. However, your score directly affects your interest rate and the amount of PMI you will pay:

• 740+: Best rates and lowest PMI premiums
• 700–739: Competitive rates with moderate PMI
• 680–699: Still good rates, but PMI costs increase
• 620–679: Approved, but expect higher rates and PMI premiums

If your score is below 620, an FHA loan may be a better fit, as FHA accepts scores as low as 580 with 3.5% down.

Debt-to-Income Ratio (DTI)

Your debt-to-income ratio compares your total monthly debt payments to your gross monthly income. Conventional loan guidelines typically require:

• Front-end DTI (housing only): 28% or less of gross income
• Back-end DTI (all debts): 45% or less, though some borrowers with strong compensating factors (high credit scores, large reserves) can be approved up to 50%

Down Payment

Conventional loans in Utah require a minimum down payment of 3% to 5% for primary residences, depending on the program:

• 3% down: Available through the Conventional 97 and HomeReady/Home Possible programs for first-time buyers
• 5% down: Standard minimum for non-first-time buyers
• 10% down: Significantly reduces PMI costs
• 20% down: Eliminates PMI entirely

Your down payment can come from savings, gift funds from family, down payment assistance programs, or proceeds from the sale of another home.

Employment and Income

Lenders require a stable employment history, typically two years of consistent income in the same field. Self-employed borrowers need two years of tax returns showing sufficient income. W-2 employees generally need recent pay stubs and two years of W-2 forms.

Property Requirements

The home must be appraised at or above the purchase price. While conventional appraisals are generally less strict than FHA appraisals (no peeling paint requirements, for example), the property still must be habitable and structurally sound.

Conventional 97: Buy a Home With Just 3% Down

The Conventional 97 program is one of the most powerful tools for first-time home buyers in Utah. It allows you to purchase a home with only 3% down — and the numbers can be surprisingly manageable.

On a $450,000 home (close to Utah's median price), 3% down is just $13,500. Compare that to the common myth that you need 20% ($90,000), and you can see why this program opens doors for thousands of Utah buyers every year.

Conventional 97 Requirements

• At least one borrower must be a first-time home buyer (has not owned a home in the past three years)
• Minimum 620 credit score (680+ recommended for best rates)
• The property must be a single-unit primary residence
• Fixed-rate loans only (no adjustable-rate)
• PMI is required until you reach 20% equity

Fannie Mae's HomeReady and Freddie Mac's Home Possible programs also allow 3% down and add income-based benefits for moderate-income borrowers, including reduced PMI rates and the ability to use boarder income or accessory dwelling unit (ADU) income to qualify.

Private Mortgage Insurance (PMI) and How to Remove It

If you put less than 20% down on a conventional loan, your lender will require private mortgage insurance (PMI). PMI protects the lender (not you) in case you default on the loan. The cost varies based on your credit score, down payment, and loan amount.

Typical PMI Costs in Utah

PMI typically ranges from 0.2% to 1.5% of the original loan amount per year, paid monthly. On a $400,000 loan, that translates to roughly $67 to $500 per month, depending on your credit profile. Borrowers with 740+ credit scores and 10% down payments often pay on the lower end of that range.

How to Remove PMI

This is one of the biggest advantages of a conventional loan over FHA: PMI can be canceled. Here is how:

• Automatic removal at 78%: Your servicer must automatically cancel PMI when your loan balance reaches 78% of the original home value, based on the amortization schedule
• Request removal at 80%: You can request PMI cancellation once your balance drops to 80% of the original value. You must be current on payments and have a clean payment history
• New appraisal: If your home has appreciated significantly, you can request a new appraisal to prove you have 20% equity and ask for PMI removal early
• Refinance: If your home value has increased, refinancing at a lower loan-to-value ratio can eliminate PMI

By contrast, FHA loans require mortgage insurance for the life of the loan if you put less than 10% down. This is one of the main reasons buyers with good credit choose conventional over FHA.

Conforming Loan Limits in Utah by County (2024)

A conforming loan is a conventional mortgage that falls within the dollar limits set by the Federal Housing Finance Agency (FHFA). In 2024, the baseline conforming loan limit for a single-family home is $766,550 in most of the country, including most Utah counties.

If you need to borrow more than the conforming limit, you would need a jumbo loan, which typically requires a larger down payment (10–20%) and a higher credit score (700+).

Source: Federal Housing Finance Agency (FHFA), 2024 conforming loan limits. All Utah counties currently share the same baseline limit.

Conventional vs. FHA Loans: Side-by-Side Comparison

Choosing between a conventional and an FHA loan is one of the most common decisions Utah home buyers face. Here is how they compare on the factors that matter most:

For a deeper comparison with real-world examples, read our full guide: FHA vs. Conventional Loans: Which Is Right for You?

Fixed-Rate vs. Adjustable-Rate Conventional Loans

Conventional mortgages come in two main flavors: fixed-rate and adjustable-rate (ARM). Your choice affects your monthly payment stability and how much interest you pay over the life of the loan.

Fixed-Rate Conventional Loans

A fixed-rate mortgage locks your interest rate for the entire loan term, which is typically 15 or 30 years. This is the most popular choice in Utah because it provides payment predictability — your principal and interest payment never changes.

• 30-year fixed: Lowest monthly payment, most popular. Ideal for buyers planning to stay long-term
• 20-year fixed: Slightly higher payment than a 30-year, but saves tens of thousands in interest
• 15-year fixed: Higher monthly payment, but significantly lower total interest. Typically comes with a lower rate than a 30-year

Adjustable-Rate Mortgages (ARMs)

An ARM starts with a lower fixed rate for an initial period (typically 5, 7, or 10 years), then adjusts annually based on a market index. Common ARM structures include:

• 5/6 ARM: Fixed for 5 years, adjusts every 6 months after that
• 7/6 ARM: Fixed for 7 years, adjusts every 6 months
• 10/6 ARM: Fixed for 10 years, adjusts every 6 months

ARMs can be a smart choice if you plan to sell or refinance within the initial fixed period. The lower initial rate can save you money compared to a 30-year fixed — but there is risk if you stay in the home longer than planned and rates have risen.

When a Conventional Loan Is Better Than FHA

While FHA loans serve an important role for borrowers with lower credit scores or limited savings, a conventional loan is often the better financial choice. Here are the scenarios where conventional wins:

1. You Have a Credit Score of 680 or Higher

With a score above 680, your conventional interest rate will be competitive with or better than FHA rates. You also avoid the 1.75% upfront FHA mortgage insurance premium, which on a $400,000 loan adds $7,000 to your loan balance.

2. You Can Put at Least 5% Down

Once you move beyond the minimum down payment thresholds, conventional PMI rates drop significantly. At 10% down with a 720+ credit score, your monthly PMI might be as low as $50–80 per month on a $400,000 loan — and it goes away once you hit 20% equity.

3. You Want to Buy a Second Home or Investment Property

FHA loans are limited to primary residences only. If you are purchasing a vacation home in Park City or an investment property in St. George, a conventional loan is your primary option.

4. The Property Has Cosmetic Issues

FHA appraisals are notoriously strict about health and safety items: peeling paint on pre-1978 homes, missing handrails, broken windows, and chipping surfaces can all trigger required repairs before closing. Conventional appraisals focus on market value and overall structural soundness, making them easier to clear.

5. You Plan to Stay Long-Term and Want PMI to Disappear

The permanent nature of FHA mortgage insurance (for loans with less than 10% down) means you will pay MIP for the entire life of the loan unless you refinance into a conventional loan. With a conventional mortgage, PMI automatically drops off, saving you thousands over the life of the loan.

Frequently Asked Questions About Conventional Loans in Utah

Why Work With Felix Vivanco for Your Utah Conventional Loan

Getting pre-approved for a conventional loan does not have to be stressful or confusing. Felix Vivanco is a licensed mortgage loan officer (NMLS #2002977) based in Provo, Utah, specializing in helping Utah families find the right mortgage — whether that is a conventional loan, FHA, VA, or a specialized program like first-time home buyer assistance.

Here is what sets Felix apart:

• Bilingual service: Fluent in English and Spanish, Felix serves Utah's diverse communities with clear, jargon-free guidance in the language you are most comfortable with
• Fast pre-approvals: Most buyers receive a pre-approval letter within 24 hours, so you can make offers with confidence in Utah's competitive market
• Side-by-side loan comparisons: Rather than pushing one product, Felix runs conventional, FHA, and other options side by side so you can see exactly which loan saves you the most money
• Local expertise: Deep knowledge of Utah's housing markets from Provo to Salt Lake City, St. George to Park City
• Builder relationships: Strong connections with Utah new-construction builders, which can translate to better terms and smoother closings