Loan Products

As the name implies, a conforming loan “conforms” to a set of standards put in place by the Federal Housing Finance Agency (FHFA), which includes guidelines around credit, debt and loan size. (For 2023, the conforming loan limit is $726,200 in most areas and $1,089,300 in higher-cost areas.) When a conventional loan meets FHFA standards, it’s eligible to be purchased by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that back much of the mortgage market. Fannie and Freddie buy loans from lenders so that lenders have more capital to create more mortgages for more borrowers. 

These loans do not meet one or more of the FHFA’s standards. One of the most common types of non-conforming loan is a jumbo loan, a mortgage in an amount that exceeds the conforming loan limit. Non-conforming loans can’t be purchased by the GSEs, so they’re considered a riskier prospect for lenders.

• Available from the majority of lenders 
• Can be used to finance primary residences, second or vacation homes and investment or rental properties 
• Can put down as little as 3% for a conforming, fixed-rate loan

• Need a credit score of at least 620 to qualify 
• Lower debt-to-income (DTI) ratio threshold compared to other types of mortgages 
• Need to pay private mortgage insurance (PMI) premiums if putting less than 20 percent down

If you have a strong credit score and can afford to make a sizable down payment, a conventional mortgage is the best pick. The 30-year, fixed-rate option is the most popular choice for homebuyers.

• Can finance a more expensive home 
• Competitive interest rates, nowadays on par with those on conforming loans 
• Often the only option in areas with high home values

• Not available with every lender 
• Higher credit score requirement, often a minimum of 700 
• Higher down payment requirement, often 10% to 20%

If you're looking to finance a home with a purchase price exceeding the latest conforming loan limits, a jumbo loan is the best route.

 Insured by the Federal Housing Administration (FHA), FHA loans can be had with a credit score as low as 580 and a 3.5 percent down payment, or a score as low as 500 with 10 percent down. While that’s certainly a benefit, FHA loans also require you to pay mortgage insurance premiums, adding to your costs. These premiums help the FHA insure lenders against borrowers who default. In addition, you can’t borrow as much money with an FHA loan; its ceiling is much lower than those on conventional conforming loans.

Guaranteed by the U.S. Department of Veterans Affairs (VA), VA loans are for eligible members of the U.S. military (active duty, veterans, National Guard and Reservists) as well as surviving spouses. There’s no minimum down payment, mortgage insurance or credit score requirement, but you’ll need to pay a funding fee ranging from 1.25 percent to 3.3 percent at closing.

• Much more flexible credit and down payment guidelines 
• Helps borrowers who wouldn’t otherwise qualify

• Additional cost for FHA mortgage insurance and VA funding fee 
• Limited to borrowers buying a home priced within FHA loan limits or in a rural area, or service members 

If your credit or down payment prevents you from qualifying for a conventional loan, an FHA loan can be an attractive alternative. Likewise, if you're buying a home in a rural area or are eligible for a VA loan, these options might be easier to qualify for.