Conventional Loans 101: Know Your Mortgage Options
Not all mortgages are created equal—do you know your options?
When it comes to financing your home, conventional loans are among the most popular and flexible choices. But did you know there are different types of conventional loans, each designed to fit a variety of financial needs and homeownership goals? Whether you’re a first-time buyer, a seasoned investor, or somewhere in between, understanding the types of conventional loans can help you make the smartest move for your future. Let’s break it down:
1) Conforming Loans
Conforming loans follow guidelines set by Fannie Mae and Freddie Mac, two government-sponsored entities that help keep the mortgage market stable. These loans:
- Follow specific standards
- Include a maximum loan limit, which is $806,500 in 2025 for a single-family home in most U.S. counties
Because they meet federal standards, conforming loans often offer better interest rates and easier approvals for qualified borrowers.
2) Nonconforming Loans
Nonconforming loans don’t meet Fannie Mae or Freddie Mac guidelines and are held by private lenders rather than sold on the secondary mortgage market. They are:
- More flexible with borrower qualifications
- Often used for larger loan amounts or unique financial situations
These loans are ideal for borrowers who may not fit into the conventional loan box but still want a mortgage tailored to their needs.
3) Fixed-Rate Loans
With a fixed-rate mortgage, your interest rate stays the same for the life of the loan—no surprises here.
- Popular for long-term homeowners
- Typically available in 30-year and 15-year terms
Fixed-rate loans offer predictability and peace of mind, making them a favorite among buyers who want stability.
4) Adjustable-Rate Mortgages (ARMs)
ARMs offer a lower initial interest rate, which can adjust periodically after an introductory period.
- Great for short-term ownership or investment strategies
- Borrowers should be prepared for rate increases over time
If you’re planning to move or refinance before the adjustment period kicks in, an ARM might save you money early on.
5) Low Down Payment Loans
Want to buy a home without putting 20% down? You’re not alone.
These loans allow you to put as little as 3–10% down, helping you preserve capital while still building equity.
- Ideal for first-time buyers and investors
- Allows for faster entry into the market
6) Nonqualified Mortgages
Nonqualified mortgages (non-QM loans) provide solutions for borrowers with:
- Alternative income sources
- Higher debt-to-income (DTI) ratios
- Unconventional financial profiles
These loans often come with slightly higher rates, but offer flexibility when traditional options fall short.
Which Loan is Best for You?
The right loan depends on your financial situation, homeownership goals, and long-term plans. Whether you’re looking for stability, flexibility, or a higher loan limit, there’s a conventional loan that fits your needs.
Ready to explore your loan options?
Let’s connect and find the right financing strategy for your dream home or next investment property.
