Types of Conventional Loans
When it comes to financing your home, Conventional Loans offer some of the most powerful options for a wide range of buyers. These loans are privately offered by lenders and aren’t insured by the government, providing flexibility to suit various financial situations and goals. Within conventional loans, there are several types that can help you unlock exclusive benefits. Here’s a breakdown of the most popular options to unlock powerful benefits with different types of conventional loans.
1. Conforming Loans
Conforming loans are conventional loans that adhere to the lending limits set by the Federal Housing Finance Agency (FHFA) and meet the criteria established by Fannie Mae and Freddie Mac.
- Loan Limits: For 2024, the conforming loan limit is typically $726,200 in most areas, but higher limits are available in more expensive markets.
- Best For: Buyers looking for a standard mortgage within these limits.
Discover how Fannie Mae supports conforming loans.
2. Non-Conforming Loans (Jumbo Loans)
Non-conforming loans, also known as jumbo loans, are for buyers looking to finance higher-value homes that exceed the conforming loan limits.
- Loan Amounts: These exceed FHFA limits, offering more flexibility for high-cost property buyers.
- Best For: Buyers seeking to finance luxury homes or properties in expensive markets.
3. Fixed-Rate Conventional Loans
Fixed-rate conventional loans provide stability with an interest rate that stays the same throughout the loan term, making payments predictable and reliable.
- Best For: Borrowers who prefer stable, predictable payments over time.
4. Adjustable-Rate Mortgages (ARMs)
Adjustable-rate mortgages start with a low fixed interest rate for a set period before adjusting periodically based on the market.
- Best For: Borrowers looking to sell or refinance before the rate adjusts, or those comfortable with potential rate changes.
5. Low-Down-Payment Conventional Loans
Some conventional loans allow down payments as low as 3%, offering more accessible options for buyers with less savings.
- Best For: First-time homebuyers or buyers with less cash on hand for a down payment.
6. Interest-Only Conventional Loans
Interest-only loans allow borrowers to pay only the interest for a set period, usually 5-10 years, with principal payments starting later.
- Best For: Investors or buyers expecting higher future income or planning to sell before the interest-only period ends.
Which Conventional Loan is Right for You?
Each type of conventional loan offers exclusive benefits that cater to different financial situations and homeownership goals. Whether you’re after the stability of a fixed-rate loan or the flexibility of an ARM, there’s a solution tailored for you.
Need help deciding? Explore our main guide on Conventional Loans for more insights on how these loans can help you achieve your dream home.