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Conventional loans

“Conventional” just means that the loan is not part of a specific government program. Conventional loans typically cost less than FHA loans but can be more difficult to get.

There are two main categories of conventional loans:

Conforming loans

Conforming loans have maximum loan amounts that are set by the government. Other rules for conforming loans are set by Fannie Mae or Freddie Mac, companies that provide backing for conforming loans.

Non-conforming loans

Non-conforming loans are less standardized. Eligibility, pricing, and features can vary widely by lender, so it’s particularly important to shop around and compare several offers.

 Mortgage insurance is required for some conventional loans. More on mortgage insurance.


Conforming

  

Conventional (conforming)
$647,200 in most counties 


  • Most common loan type

  • Loan amount must be $647,200 or less in most counties and may be as high as $970,800 in high-cost counties.

  • If your down payment is less than 20%, you’ll typically need mortgage insurance

     

Conforming jumbo 
$647,200 to county limit


  • Conforming loan for amounts higher than $647,200

  • Only available in certain counties

  • Maximum loan amount varies by county

     

Non-conforming

  

Jumbo (non-conforming)
Up to $1-2 million


  • Jumbo loan for amounts greater than the Conforming Jumbo limit in your county, up to $1-2 million

  • Rules vary by lender, but usually need good credit and a high down payment to qualify

Non-conforming (other)

  • Loans of any size that do not fall into another category

  • Some loans in this category are intended for borrowers with poor credit. These loans tend to have high rates and may contain risky features. These can include:          

    • Loans that allow for minimal documentation of your income

    • Loans that allow you to pay only the interest or allow your loan balance to increase



  • Some lenders also offer niche programs for mainstream borrowers with unusual circumstances. These can include:          

    • Loans for properties with non-standard features (such as more than 10 acres of land, properties with agricultural income, or properties that are difficult to appraise)

    • Loans for affluent customers with tricky finances, such as self-employed borrowers, or newly graduated doctors


 Many of the loans that got people in trouble during the crisis fell in the “non-conforming (other)” category.

If you are considering a non-conforming loan, consult with multiple lenders. Ask if you could qualify for a conforming or FHA loan instead. Never make a final decision about which loan to take before getting your official Loan Estimates.