A conventional loan is a mortgage that is not backed by a government agency. Conforming conventional loans follow the lending guidelines set by the Federal National Mortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac).
You can get a conventional loan with as little as 3% down (for qualified first-time homebuyers with a loan amount up to a maximum of $510,400) or 5% down. However, if you don’t put at least 20% down, you will be required to pay private mortgage insurance which insures the lender for the equivalent of a 20% down payment in case of default.
Conventional loan limits vary by the county in which the property is located. In California, the maximum conventional loan limits range from $510,400 up to $765,500 in the “high cost” counties which include Alameda, Contra Costa, Los Angeles, Marin, San Francisco, Orange, San Benito, Santa Clara and Santa Cruz.
A FHA loan has two levels of mortgage insurance:
Consider this loan if:
FHA loan limits vary by the county in which the home is located. In California, the FHA loan limits range from $331,760 up to $765,600 in the “high cost” counties which include Alameda, Contra Costa, Los Angeles, Marin, San Francisco, Orange, San Benito, Santa Clara and Santa Cruz.
A VA home loan is specifically for Servicemembers, Veterans and eligible surviving spouses to purchase or refinance a primary home. VA loans are provided by private lenders such as banks and mortgage companies with a portion guaranteed by the Veteran’s Administration (VA).
VA loans generally require:
A VA loan requires a Certificate of Eligibility issued by the Veteran’s Administration.
A jumbo loan is typically a mortgage that exceeds the county conventional loan limits. Jumbo loans are generally offered by large banks and financial institutions and are kept in their loan portfolio. Each individual bank and financial institution can set their own set of approval guidelines according to their investment goals for their portfolio. For this reason, it can be complicated for a buyer/borrower to know which lender is likely to offer the best approval guidelines for their individual situation.
Jumbo loans are generally more conservative as far as minimum credit scores, down payment, debt-to-income and funds in the bank after closing.
Many Jumbo lenders allow 3 rd party lenders such as mortgage banks and mortgage brokers to originate loans on their behalf as long as their approval guidelines are met in their entirety. This can be very helpful to a buyer/borrower as a one-stop entity to compare approval guidelines between various lenders and find the right fit.
There is no shortage of highly qualified buyers/borrowers who don’t fit “inside the box” of standard approval guidelines. As a result, there is a subset of lending that is dedicated to this niche. Some options include: