Loan Types

Loan Types ## Conventional Loans Conventional loans are not insured or guaranteed by any federal government agency. They are originated and funded by private lenders such as banks, credit unions, and mortgage companies. Conventional loans are divided into two categories: conforming loans (which meet Fannie Mae and Freddie Mac guidelines, including loan limits — in 2024, $766,550 for most areas, with higher limits in high-cost CA counties up to $1,149,825) and jumbo loans (which exceed conforming limits and typically require stronger credit and larger down payments). Because no government entity backs them, conventional loans carry stricter credit and underwriting standards. Down payments can be as low as 3–5%, but if LTV exceeds 80%, the lender requires private mortgage insurance (PMI). --- ## Government-Backed Loans FHA Loans are insured by the Federal Housing Administration. They allow down payments as low as 3.5% for borrowers with credit scores of 580+. A key cost is the Mortgage Insurance Premium (MIP): an upfront MIP (currently 1.75% of the loan amount) plus an annual MIP paid monthly for the life of the loan (if down payment < 10%). FHA loans have loan limits set by county. In California, FHA limits in high-cost metros can exceed $1,000,000. VA Loans are guaranteed by the Department of Veterans Affairs and are available to eligible veterans, active-duty service members, and surviving spouses. Key features: no down payment required, no PMI, and competitive interest rates. However, a funding fee (typically 1.25–3.3% of the loan amount, depending on down payment and whether it's a first use) is charged unless the borrower has a service-connected disability. VA loans have no set loan limits for eligible borrowers with full entitlement. **USDA Rural…