• Conforming Loans: These loans meet Fannie Mae and Freddie Mac guidelines, including loan amount limits. For example, the 2024 limit for a single-family home in most areas is $726,200, though it is higher in high-cost areas.
• Non-Conforming Loans: These loans do not meet Fannie Mae and Freddie Mac guidelines. Jumbo loans, which exceed conforming loan limits, are a common example.

• Flexibility: Conventional loans offer more flexibility in terms of property types and loan amounts. They can be used for primary residences, second homes, and investment properties.
• Lower Costs: Unlike FHA loans, conventional loans do not require upfront mortgage insurance premiums. Additionally, private mortgage insurance (PMI) can be canceled once sufficient equity is built up.
• Potentially Lower Interest Rates: Borrowers with excellent credit scores might qualify for lower interest rates compared to government-backed loans

Challenges of Conventional Loans

• Stricter Requirements: This loans often require higher credit scores and lower debt-to-income ratios. Larger down payments may also be necessary.
• PMI Costs: If the down payment is less than 20%, PMI can add to the monthly mortgage payment until enough equity is built.
• Less Flexible Terms: These loans might have less flexible repayment terms compared to some government-backed loans.
• More Stringent Appraisal Standards: Properties must meet stricter appraisal standards, which can sometimes complicate the approval process.

REMEMBER

Conventional loans are ideal for borrowers with good credit, stable income, and a significant down payment. They offer flexibility and lower costs but have stricter qualifying criteria than government-backed loans.