Conventional Loans

Conventional loans are the most common type of mortgage and are not insured or guaranteed by the government. They can be either fixed-rate or adjustable-rate (more on that below). There are two main types of conventional loans:

• Conforming Loans: These loans meet Fannie Mae and Freddie Mac’s standards and are sold to investors on the secondary market. In most counties across California, the conforming loan limit for a single-family home is $806,500. In higher-cost markets, including Los Angeles and Orange County, the limit increases to $1,209,750.

• Non-Conforming Loans (Jumbo Loans): These loans exceed conforming loan limits and come with stricter requirements, such as higher credit scores and larger down payments.

Government-Insured Loans: Federal Housing Administration (FHA) Loans

FHA loans are government-backed and offer more flexible down payment and credit score requirements than conventional loans. FHA loans require:

• Upfront Mortgage Insurance: 1.75% of the loan amount

• Annual Mortgage Insurance Premium (MIP): MIP can only be canceled after 11 years if you put at least 10% down. Alternatively, you can refinance into a conventional loan to remove MIP once you have at least 20% equity.

Government-Insured Loans: Department of Veterans Affairs (VA) Loans

VA loans are backed by the government and provide qualified borrowers with:

• No down payment

• Limited closing costs

• No private mortgage insurance (PMI)

Current and former service members, as well as eligible surviving spouses, may qualify for a VA loan with a Certificate of Eligibility (COE). Learn more about VA loan eligibility.

Adjustable-Rate Mortgages (ARMs)

Adjustable-rate mortgages (ARMs) have interest rates that change over time. ARMs typically offer a lower introductory interest rate that is fixed for a set period, then adjusts annually or biannually thereafter (for example, a 10/1 ARM has a fixed rate for the first 10 years and then adjusts every year). ARMs can be structured as conventional, FHA, or VA loans. ARMs can be a good option when interest rates are expected to drop over the next few years, as you can always refinance to a fixed-rate mortgage.