When buying a house, many people opt for a conforming loan, which allows you to obtain a mortgage up to a specific limit. If you want to buy a house before the end of 2025 with a conforming loan, most borrowers face a conforming loan limit of $806,500. For 2026, the Federal Housing Finance Agency (FHFA) has announced a $26,250 increase to $832,750.

MORE: Read our guide for first-time home buyers.

Before we discuss the conforming loan limits (CLL), you should understand what a conforming loan is in the first place.

A conforming loan is probably what you’d think of as a “regular mortgage.” It’s a type of conventional mortgage that adheres to Fannie Mae and Freddie Mac guidelines — including borrowing limits. Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) overseen by the Federal Housing Finance Agency (FHFA).

Mortgage lenders often originate conventional loans and then sell them to the GSEs to free up cash to underwrite more loans. Fannie Mae and Freddie Mac are legally barred from purchasing mortgages on single-family homes with origination balances over a set amount, or the conforming loan limit.

Ultimately, the GSEs package the loans they purchase into mortgage-backed securities (MBS), which are types of investments made up of many types of home loans. The GSEs either give MBS to the lender in exchange for the loans or sell the loans to investors. Investors like to buy conforming loans because they’re perceived as safe since they meet the GSE standards.

In fact, for a fee, Fannie Mae and Freddie Mac will guarantee the principal and interest payments on the MBS they issue.

The FHFA, in accordance with the Housing and Economic Recovery Act of 2008 (HERA), updates the baseline loan limit each year to reflect the change in the average home price. The agency goes by the House Price Index (HPI), which measures the average price changes in repeat property sales or refinances bought or securitized by the GSEs.

The values below reflect the baseline CLL for all loans delivered to the GSEs in 2025.

And here are the limits for those planning to buy a house in 2026.

“The larger the loan, the larger the risk. [Limits are] supposed to help prevent overborrowing and foreclosures and to maintain market stability,” Anna Smith, senior mortgage loan officer at Movement Mortgage, said via email.

"For borrowers, if there is less risk in lending, obtaining financing should be, in theory, more attainable,” Smith said. “When there is less risk, typically less strict underwriting standards exist, lower interest rates happen, and overall easier lending practices happen.”

Yahoo Finance Note: A select few counties in the contiguous United States have higher maximum loan limits for conforming mortgages because they are high-cost areas. You can see the CLL in your county using the interactive map published by the FHFA.

How much house can I afford? Use our home affordability calculator.

The CLL is dynamic and shifts with housing market trends. In the early 1970s, the baseline limit was just $33,000.

Here’s a look at how it’s changed in the last decade:

Conforming mortgage loan limits were the same for the years 2006 to 2016, but the FHFA has increased them annually ever since.

"This means median home prices have continued to climb since then,” Smith said. “In years where housing prices remain stagnant or decrease, [the FHFA does] not lower the conforming loan limit.”

Learn more about why home prices are so high.

If your dream home costs more than the CLL, you have a couple of options. You could “... piggyback a smaller loan on top of the first lien to keep the main loan in the conforming limit and still finance what you need,” Smith said. “This means you may pay higher interest and fees on the smaller piggybacked loan, but you'll have a nice conforming loan otherwise.”

You could also apply for a jumbo loan, which is a conventional mortgage that exceeds the CLL. Securing a jumbo loan can help you buy the residence while only incurring one housing debt.

Qualifying for a jumbo loan might be harder than a conforming loan. “When lenders choose to lend over those loan amounts, they are risking more of their own money, as the [GSEs] are not insuring those funds,” Smith said. "Jumbo lending can often become more complex than conforming, as the institutions lending that money are often writing their own rules and regulations to manage their risk.”

As a result, you may need a higher credit score, down payment, and more than six months of cash reserves to be eligible for this type of financing.

However, it’s worth noting that more mortgage lenders tend to offer jumbo loans than piggyback loans.

You may want to borrow more than the conforming limit if your target property costs more than that amount. However, you should ensure you can comfortably repay the larger debt before applying for a jumbo loan.

A conforming loan is a conventional loan that complies with Fannie Mae and Freddie Mac standards. On the other hand, a non-conforming loan is a mortgage that doesn’t follow the GSE guidelines. A jumbo loan is one example of a non-conforming loan. Other examples are government home loans, including FHA, VA, and USDA loans.

You can find the current (and historic) conforming loan limit values on the FHFA website. The agency publishes the upcoming year’s limits several weeks before they go into effect.

Laura Grace Tarpley edited this article.

First-time home buyers need an edge. Buying a house in 2025 takes a series of savvy financial moves, and you'll need a mortgage lender who can be a true partner in the process. Here are the best mortgage lenders to provide you with first-time buyer grants, loans, and more.

Why Rocket Mortgage stands out: Rocket helps renters make the leap to homeownership with a grant equal to a portion of rent paid.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Conventional, FHA, and VA loans

Minimum down payments: 1% for conventional, 3.5% for FHA, 0% for VA loans

Minimum credit scores: 620 for conventional, 580 for FHA, and 580 for VA loans

Rocket RentRewards allows current renters to apply up to 10% of what they pay in rent to closing costs, up to $5,000.

The ONE+ gives first-time home buyers a 2% grant, which allows them to make just a 1% down payment with a conventional loan.

Rocket has an above-average customer satisfaction score, as determined by J.D. Power.

Advertised mortgage rates are reduced by adding up to two discount points.

Total mortgage costs are a mixed bag. Rocket offered median interest rates to borrowers in 2024 — but much higher-than-median loan costs.

Read our complete Rocket Mortgage review.

Why Bank of America mortgages stand out: With the deep resources of a huge national brand, Bank of America offers grants to first-time home buyers.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Conventional, FHA, and VA loans

Minimum down payments: 3% for conventional, 3.5% for FHA, and 0% for VA loans

Minimum credit scores: "We don’t publish minimum credit scores," Susan Atran, senior vice president of Bank of America, told Yahoo Finance via email.

BofA offers grants up to $7,500 for closing costs and up to $10,000 in down payment assistance for qualified buyers in many, but not all, states.

Existing customers may qualify for an origination fee or interest rate deduction. To qualify, you'll likely have to sign up to draft your mortgage payments from an account.

A home-buyer program for medical professionals allows borrowers to make lower down payments and exclude student loans from debt limits. Residents and fellows can also close on a loan 90 days before starting a new position.

Bank of America is near the top of customer satisfaction rankings in the 2024 J.D. Power survey.

Bank of America's sample mortgage rates are based on an above-average credit score of 740 or higher. According to FICO, the national average is 715. Keep this in mind when comparing BofA’s mortgage rates with competitors’ rates.

Why Pennymac mortgages stand out: Pennymac is the largest lender in the nation for loans insured by the FHA (Federal Housing Administration) and is well-equipped to guide first-time home buyers through the government loan process.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Conventional, FHA, VA, and USDA loans

Minimum down payments: 3% for conventional, 3.5% for FHA, 0% for VA, and 0% for USDA loans

Minimum credit scores: 620 for conventional, 580 for FHA, 580 for VA, and 580 for USDA loans

Pennymac is the largest FHA mortgage lender by loan volume in the U.S., and FHA loans are typically geared toward first-time buyers.

The lender offers a rate buydown that can lower your interest rate by 1% for one year.

When you are preapproved for an eligible mortgage, Pennymac will give you a $1,000 credit to apply to closing costs.

Use a real estate agent endorsed by Pennymac and get $350 to $9,500 cash after closing.

Pennymac has a well-below-average rating for customer satisfaction, according to the 2024 J.D. Power study.

Why Veterans United mortgages stand out: A leading VA mortgage lender, Veterans United specializes in serving military-connected borrowers, limiting its loan selection to only those that apply to its service-related clientele.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Primarily VA loans; however, Veterans United does offer conventional, FHA, and USDA loans

Minimum down payments: 0% for VA, 3% for conventional, 3.5% for FHA, and 0% for USDA loans

Minimum credit scores: 620 for all loans

Veterans United is, by far, the highest-volume VA loan provider in the nation.

The lender offers a rich supply of educational material. The resources are deep, well-researched, and include calculators, articles, videos, and a complete VA home-buying course.

Veterans United garnered the highest score of all lenders in J.D. Power's customer satisfaction survey.

Cons

Veterans United provided only average value to borrowers in 2024, with a record of median interest rates and loan costs.

Read our complete Veterans United mortgage review.

Why U.S. Bank mortgages stand out: U.S. Bank offers rural and suburban home financing with no down payments through a USDA-backed program.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Conventional, FHA, VA, and USDA loans

Minimum down payments: 3% for conventional, 3.5% for FHA, 0% for VA, 0% for USDA loans

Minimum credit scores: 640 for all loans

U.S. Bank is a top 20 loan volume USDA lender. Mortgages backed by the Department of Agriculture have relaxed credit standards and allow no down payment to home buyers of modest means.

Existing U.S. Bank customers may be eligible for a credit of up to $1,000.

A prequalification process is free, "takes five minutes," and does not impact your credit.

US Bank's mortgage rates, as published on its website, look appealing. However, the conventional loan rates shown require a down payment of 25% and a FICO score of 740 or better. That's well above the national average credit score of 715.

Why Navy Federal mortgages stand out: Navy Federal Credit Union distinguishes itself by offering lower mortgage interest rates and loan costs than many competing lenders.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Conventional and VA loans

Minimum down payments: 5% for conventional, 0% for VA loans

Minimum credit scores: "Navy Federal does not disclose its credit score thresholds for proprietary reasons," a public relations contact for NFCU told Yahoo Finance.

Navy Federal offered below-median interest rates and loan costs to borrowers in 2024.

The Special Freedom Lock allows you to relock your interest rate twice if rates move lower before your loan closing.

The No-Refi Rate Drop offer allows you to tap a lower interest rate six months or later after closing — for a $250 fee but without additional closing costs or changing your loan terms.

A rate guarantee states that Navy Federal will match a lower mortgage rate offered by a competing lender or pay you $1,000.

Navy Federal ranks above average in the latest J.D. Power Mortgage Origination Satisfaction Study.

Sample mortgage rates are quoted "as low as" and include discount points and a 1% origination fee. Your rate will likely differ from what is shown.

Why Guild Mortgage stands out: Guild accepts alternative forms of credit, such as utility bills and rent payments, so that borrowers without a credit score or with meager credit histories can still qualify for a mortgage.

Availability: 49 states (excluding New York) and Washington, D.C.

Loans for first-time buyers: Conventional, FHA, VA, USDA, and the Complete Rate program

Minimum down payments: 3.5% for FHA, 0% for VA, 0% for USDA, and varies by loan type for the Complete Rate program

Minimum credit scores: 620 for conventional, 540 for FHA, 540 for VA, 540 for USDA, and no credit score for the Complete Rate program

For first-time home buyers without a credit score or lacking a long credit history, Guild's Complete Rate program can consider alternative payment histories and bank deposits.

An education program helps first-timers prepare to qualify to buy a home and can provide down payment assistance.

Guild has a below-average score for customer satisfaction as reported by J.D. Power.

Learn how to buy a house when you have no credit score.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Conventional, FHA, VA, and USDA loans

Minimum down payments: 3% for conventional, 3.5% for FHA, 0% for VA, 0% for USDA loans

Minimum credit scores: 620 for conventional, 550 for FHA, no minimum for VA, and 620 for USDA loans..

Why Rate mortgages stand out: An early-mover in digital mortgages, Rate (previously Guaranteed Rate) also offers face-to-face service in many markets.

Enhancing online convenience with a personal service option, Rate has hundreds of branch locations across the nation.

A "Same Day Mortgage" promises loan approval — but not loan funding — within 24 hours of locking in a mortgage interest rate and submitting financial documents.

Advertised rates for conventional loans factor in more than one discount point, are based on a 20% down payment, and a FICO score well above the national average.

Rate scores well below average in customer satisfaction, according to the latest J.D. Power Mortgage Origination Satisfaction Study.

Why Chase Bank mortgages stand out: Chase Bank offers a wide assortment of home-buying tools, including nearly a dozen calculators, plus videos, checklists, FAQs, and more. These are useful for first-time buyers who aren’t familiar with the home-buying process.

Availability: All 50 states and Washington, D.C.

Loans for first-time buyers: Conventional, FHA, and VA loans

Minimum down payments: 3% for conventional, 3.5% for FHA, 0% for VA, 0% for USDA loans

Minimum credit scores: 620 for all loans

Chase earns Yahoo Finance's highest 5-star rating for its abundant online learning resources, which are perfect for guiding first-time home buyers through a complicated process.

Chase offers an on-time closing guarantee of $5,000 and claims it can close a home loan as quickly as three weeks under specific guidelines.

VA loans may be eligible for a credit of $2,500 to $5,000, which can be applied to your interest rate first, then closing costs.

Chase has an above-average rating for customer satisfaction, according to the 2024 J.D. Power study.

The conventional loan interest rates on the Chase website are enhanced with strict credit standards, including 20% to 30% down payments, one discount point, and borrowers with "excellent" credit. In other words, the rate you earn could be much different.

A first-time home buyer is generally defined as someone who has never owned a home or hasn't owned one in the past three years. If you are single and previously co-owned a house with a spouse, you may also be considered a first-time home buyer.

However, additional qualifications may be imposed by the lender, state or local agency, or housing program you are applying to. Some programs may have income, credit score, or location limits and could require the completion of an educational course.

Want to buy a house in early 2026? Here's how to prepare.

The advantages of being considered a first-time home buyer include:

Making a low — or no — down payment.

Receiving down payment or closing costs assistance.

Qualifying with a lower credit score or with relaxed credit terms.

Being entitled to tax breaks. That can include tax credits such as Mortgage Credit Certificates (MCCs), as well as other tax deductions and credits that come in and out of favor.

Many mortgage lenders offer conventional loans backed by Fannie Mae. With the HomeReady program, you only need a 3% down payment and a 620 credit score. You also might qualify with a debt-to-income ratio as high as 50%.

You must finish a home-buyer education course to qualify for this program, which is often useful for first-time buyers.

Conventional loans backed by Freddie Mac also require a 3% down payment and an online home-buyer education course. The main differences from the HomeReady program are that Home Possible loans require a 660 credit score and a 45% DTI ratio for buying a house.

FHA loans can be great for first-time home buyers because you can qualify with a 580 credit score and 3.5% down payment. (You can even get an FHA loan with a score as low as 500, but you'll need 10% down in this case.)

VA loans are for eligible active military personnel, veterans, and their families. They're excellent mortgages for getting your foot in the door of homeownership because you don't need a down payment.

The U.S. Department of Veterans Affairs also doesn't set a minimum credit score, so you can shop for lenders that accept low scores if that's an issue.

You also don't need a down payment for USDA loans. These mortgages are for low-to-moderate-income borrowers who are buying in rural and suburban areas.

As with VA loans, the U.S. Department of Agriculture doesn't set a minimum credit score, so the credit score needed will depend on the lender.

Federal programs such as VA, FDA, and USDA loans allow for easier qualifying and lower down payments. First-responders and teachers may qualify for additional assistance in programs such as the Good Neighbor Next Door.

Other low-down-payment options are administered by government-sponsored enterprises Fannie Mae and Freddie Mac, through mortgage lenders.

State housing finance authorities are the backbone of many first-time home buyer down payment and closing costs assistance programs. Some cities offer similar incentives, often in partnership with nonprofits.

Lender programs may include mortgage rate buydowns, grants applied to down payments (such as 1%-down-payment loans), and other closing costs assistance.

Programs at any level — national, state, local, or lender — can include grants and low-interest loans that are deferred or don't require payback at all.

First-time home buyers are a valuable commodity to financial institutions because buying a house can be the beginning of a long financial relationship.

You want to comparison-shop three or more lenders who are willing to:

Explain the process.

Compete for your business.

Meet deadlines and expectations.

Respond promptly.

Treat you with respect.

Once you have your lender contenders, take these three steps:

Obtain mortgage preapprovals from each before you shop for a house.

When you have a purchase contract, compare loan estimates from each lender.

Examine all loan costs, especially lender fees and origination charges.

Remember, you are the buyer — the decision is yours. Resist pressure and false deadlines. Negotiate firmly but honestly.

Learn how to avoid these 7 costly first-time home buyer mistakes.

An FHA loan is often a good mortgage option for first-time home buyers because you only need a 580 credit score and a 3.5% down payment (or a 500 credit score with 10% down). It also allows borrowers with more debt to buy a home than many other types of mortgages. However, a conventional loan could be a better choice if you're a first-time buyer with a strong credit score and lower debt levels, because many lenders only require 3% down.

First-time home buyers should look into three government-backed home loans: FHA, VA, and USDA loans. FHA loans are geared toward people with higher debt levels and lower credit scores. VA loans are for military-affiliated buyers who don't have money for a down payment. USDA loans are for lower-income homeowners who are buying in rural areas and don't have money for a down payment. However, a conventional loan could still be a great fit for first-time buyers with 620 credit scores and 3% down.

In 2024, the median down payment among first-time home buyers was 9%, according to Realtor.com. You can put down as little as 0% as a first-time buyer getting a VA loan or USDA loan. You can also put down 3.5% for an FHA loan. Depending on the lender and how strong your finances are, you may be able to put down as little as 3% with a conventional mortgage.

A 30-year mortgage term is usually the choice for first-time buyers. All common types of mortgage loans offer a 30-year option, and it has lower monthly payments than, say, a 15-year mortgage.

As a first-time home buyer, a 620 credit score is preferable. You can qualify for a conventional mortgage with most lenders with a 620 score. However, FHA loans are often good deals for first-time buyers who might not have had time to build strong credit yet — FHA loans only require a 580 score.

An FHA loan is usually the easiest to get approved for because it has relatively lenient credit score requirements. But if you're affiliated with the military and are eligible for a VA loan, you'll likely be approved because the VA doesn't set a minimum credit score — the requirement varies by mortgage lender.

Yahoo Finance reviews mortgage lenders based on five primary considerations: 1) Interest rates. Using 2024 Home Mortgage Disclosure Act data from almost 5,000 mortgage companies, we analyze mortgage lenders based on issued mortgage rates below or above the annual median of reporting lenders. 2) Affordability. A measure of loan product availability and the willingness of a lender to offer government-backed loans, low down payments, down payment assistance, and consideration of nontraditional credit. 3) Loan costs. HMDA data is again analyzed, and total loan costs are compared to the annual median. 4) Rate transparency. The ability of a website user to obtain a mortgage interest rate estimate. We also consider whether rates are enhanced with discount points or high credit score requirements, disclaimers revealing rate assumptions, sample advertised rates, and whether adjustable or no discount point rate estimates are available. 5) Online features. An analysis of the educational material, calculators, and additional resources available to users.

Advertisers or sponsorships do not influence ratings.

Editorial disclosure for mortgages:

The information in this article has not been reviewed or approved by any advertiser. The details on financial products, including interest rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the lender's website for the most current information. This site doesn't include all currently available offers.

Laura Grace Tarpley edited this article.

Buying a home is a process that requires getting comfortable with large numbers. The purchase price of the house, the down payment, the monthly payment — all big numbers.

A mortgage calculator helps you make sense of what can be abstract. Using it allows you to consider all the factors that can impact home affordability, quality of life, and wealth accumulation. Not to mention helping you achieve peace of mind with what might be a bit mind-boggling.

Here's how to think through the calculations step by step.

Learn more: Everything you should know as a first-time home buyer

Just four data points will get you started:

Easy enough, this is the price you'll pay for the home you're considering. When it comes time to make the deal, the price may be a point of negotiation. Here, you can start with a price that buys you all the amenities you could possibly want — and then work down from there to achieve a real-life monthly payment you can afford.

Read more:

What is the monthly payment on a $600,000 mortgage?

How much is a mortgage on a $500,000 house?

What is the monthly payment on a $400,000 mortgage?

How much is the monthly payment on a $300,000 mortgage?

What is the monthly payment on a $200,000 mortgage?

The down payment is another number that might begin as a moving target. You might put in a number that's the bare minimum, say a 3% down payment, and then work your way up from there.

If you are a military-connected borrower using a no-down-payment-required VA loan or a low-income buyer in a rural area eligible for a USDA loan, you may even have earned the right to put a zero here.

Learn more: How much down payment do you need for a house?

A loan term is the number of years you expect to pay off the loan. You'll see that a 30-year fixed-rate loan is the default here. Don't let that stop you from investigating the monthly payment of a 15-year loan or one with an even shorter term. Quicker paybacks result in paying less interest and gaining value, or equity, in your home faster.

Learn more: 15-year vs. 30-year mortgage — Which is better?

You can take a look at the lender offers above to fine-tune your mortgage interest rate, but for now, put in a rate that you believe you'll qualify for. It's a good idea to resist the temptation to be overly optimistic here. It feels much better to qualify for a lower mortgage rate than you expected rather than the other way around.

Dig deeper: How to get the lowest mortgage rate possible

Now that you've filled in the basics, the Yahoo Finance mortgage payment calculator reveals your estimated monthly payment with principal and interest estimates built in.

Here are typical costs often included in your monthly mortgage payment.

Mortgage principal: The amount you owe on the loan. This is estimated for you.

Mortgage interest: The interest you pay to borrow the money. This is included with the principal estimate.

Homeowners insurance: An estimated monthly cost for the insurance premium you'll pay to protect your home in case of damage.

Property taxes: The taxes you'll pay on your home and land. This is not estimated, but you can click on the dropdown link to add it to your estimated payment if you have an idea of how much it costs.

Private mortgage insurance: If you put down less than 20% on a conventional loan, the lender will charge you PMI. You can put an estimate of that in the dropdown as well.

HOA fees: Some neighborhoods charge homeowners' association fees to pay for maintenance and improvements on shared spaces. You can add that to your monthly payment calculation.

Tip: Other costs of homeownership are not built into the loan payment, including: utilities, maintenance, repairs, and upgrades.

Read more: PITI (principal, interest, taxes, insurance) and how it affects your mortgage payment

In the middle of the payment calculator is a pie chart showing a graphic breakdown of the main components of your monthly payment: principal and interest in blue, a property tax estimate in yellow, and the estimated homeowners' monthly insurance premium in teal.

Learn more: How much house can I afford? Use Yahoo Finance's home affordability calculator.

The Yahoo Finance mortgage calculator does the work for you, but for those who wish to look under the hood, here is the actual calculation:

A is the monthly mortgage payment (in dollars)

P is the principal amount of the loan (the amount you borrow)

r is the monthly interest rate (as a decimal)

n is the total number of payments over the life of the loan

Here's how to use the formula:

Convert the annual interest rate to a monthly interest rate: Divide the annual interest rate by 12. For example, if your annual interest rate is 5%, your monthly interest rate would be 0.05 / 12 = 0.004167.

Calculate the total number of payments: Multiply the number of years in your loan term by 12 (i.e. 12 months of the year). For example, a 30-year fixed-rate mortgage would have 30 years x 12 months = 360 payments.

Put the values into the formula: Once you have the monthly interest rate and the total number of payments, you can plug them in along with the home loan amount (P) into the formula to calculate the estimated monthly mortgage payment.

Remember, this is an estimate from a manual calculation. The actual payment may vary depending on factors such as private mortgage insurance and property taxes, which are included in the Yahoo Finance calculator but are still only estimates.

Learn more: What is mortgage insurance, and how much does it cost?

Taking a mortgage payment calculator for a spin can be an interesting exercise. But there are some serious decisions it can help guide, as well. For example:

When shopping for a mortgage loan, you can compare the interest rates offered by different mortgage lenders by entering them into the calculator and seeing how a slight improvement in your rate can impact your monthly payment. Perhaps more importantly, you can get a feel for just how much interest you'll save over the life of a home loan.

A 30-year mortgage loan has traditionally been the standard loan term, but many other options exist. A shorter term will pay off the loan faster and set you on the path to greater wealth accumulation. That's important if you want to shorten the runway to your life after work.

You can also compare a fixed-interest-loan rate with an ARM's introductory rate. Adjustable-rate mortgages can be appropriate for home buyers who expect to move before the five- or 10-year introductory rate period ends.

Dive deeper: Mortgage amortization — What is it, and why does it matter?

A mortgage calculator can also provide a real-life comparison of how important a down payment can be in lowering your monthly payment. Or in deciding just how little you can put down and still afford the payment.

Keep reading: The average down payment on a house

Being in a house that takes just about every last nickel of your income can be miserable. That's being "house poor." You don't want to be in a situation where you can't afford anything else, like vacations, contributing to savings and retirement accounts, and significant monthly expenses like childcare.

Dig deeper: What percentage of your income should go to a mortgage?

When mortgage rates begin moving down, a mortgage calculator can help you know when to start shopping for a loan refinance. You can balance the costs of the new loan with the interest rate savings you can expect.

Read more: 6 times when it makes sense to refinance your mortgage

Finally, a mortgage calculator can help you know where your sweet spot of affordability is. If the estimated payment is too high, you can consider these strategies to lower it:

Buy less house. It sounds simple, but it may not be easy to adjust your expectations at first. Start looking at smaller homes or longer commutes. You may find the perfect — and more affordable — house.

Make a larger down payment. (You'll also avoid paying PMI.)

Qualify for a lower interest rate.

Extend the loan term.

Learn more: How a 40-year mortgage works

A $70,000 salary could help you comfortably afford a home of roughly $210,000. However, the exact number will depend on your mortgage rate, down payment amount, and whether you have other monthly debt payments.

You would need roughly a $100,000 salary (probably a little more) to afford monthly payments on a $400,000 mortgage. This means a gross monthly income of at least $8,334.

The recommended income for a $500,000 mortgage is at least $125,000, or $10,417 per month before taxes.

One of the first decisions to make before you start shopping for a home is how you’ll finance the purchase. There’s a good chance you’ll find yourself choosing between an FHA or a conventional loan, which are both popular options.

Learn more: The best mortgage lenders right now

FHA loans are insured by the Federal Housing Administration, a subsect of the U.S. Department of Housing and Urban Development (HUD). They are issued by banks, credit unions, and other approved lenders.

Since these mortgages are insured by the government, FHA loan lenders can be more lenient with their credit and down payment requirements. The FHA loan program is designed to make homeownership more accessible to first-time home buyers and to borrowers with limited savings or credit challenges.

Conventional loans typically have stricter eligibility requirements, which means you may need a higher credit score and, in some cases, a larger down payment to qualify.

Conventional mortgage loans can be purchased by Fannie Mae and Freddie Mac, which are both part of the Federal Housing Finance Agency (FHFA). Conforming conventional loans can’t exceed borrowing limits set by the FHFA. Jumbo loans, which are another type of conventional loan, exceed those limits. Conventional loans are available from most mortgage lenders.

Your credit score is an important factor in any loan approval. Most lenders use the FICO scoring model, which ranges from 300 to 850 points. The higher your score, the more trustworthy you are as a borrower from a lender’s point of view.

You generally need a minimum credit score of 620 to be eligible for a conventional mortgage. You can qualify for an FHA home loan with a credit score as low as 500 with a 10% down payment or 580 with a 3.5% down payment.

Your debt-to-income ratio (DTI) compares your gross monthly income with the minimum payment on your recurring debt, such as credit cards, student loans, car loans, and mortgage payments. Lenders evaluate your debt-to-income ratio to make sure you can repay your mortgage loan.

FHA lenders generally prefer a maximum DTI ratio of 43%, but in some cases, they may allow a ratio as high as 57%. Conventional lenders prefer a maximum DTI ratio of 36% to 43%, but sometimes they will go as high as 50%.

When you take out a mortgage to buy a house, your lender will schedule a home appraisal to ensure the property has sufficient value. This way, both you and the lender know the amount you are paying is comparable to the actual home value.

The FHA appraisal process is more demanding than that for a conventional loan. Your property must meet the HUD minimum property requirements, so the appraiser will look for specific safety and construction issues.

You only need to put 3.5% down for FHA loans if your credit score is 580 or higher. If your credit score falls between 500 and 579, you’ll need to come up with a higher down payment of 10%.

Down payment requirements for conventional loans vary from lender to lender. Some may only require a minimum 3% down payment, while other lenders may ask you to put at least 5% down.

Learn more: How to get a mortgage with a 1% down payment

Since FHA loans are backed by the government, they typically have slightly lower mortgage rates than conventional loans.

In both cases, rates vary depending on numerous factors, including your credit score. The lowest mortgage rates are available to borrowers with high credit scores and larger down payments.

Mortgage insurance protects your lender if you default on your loan.

For conventional loans, you’ll need to pay for private mortgage insurance (PMI) if you put less than 20% down. According to the government-sponsored entity Freddie Mac, you can expect to pay between $30 and $70 monthly per $100,000 financed.

For FHA loans, you must pay a mortgage insurance premium (MIP) for the life of the loan, regardless of how much you put down. The only exceptions are if your loan origination date was June 3, 2013, or later, and you made a down payment of at least 10%. In this case, your FHA mortgage insurance is removed after 11 years. You can also remove FHA MIP if your loan origination date was between Jan. 1, 2001, and June 2, 2013, and you’ve reached 22% equity in your home.

MIP consists of two parts: the up-front mortgage premium, which is 1.75% of your base loan amount, and the annual MIP, which depends on various factors

Loan limits cap the amount you can borrow and vary based on the housing costs in each area.

The Federal Housing Finance Agency (FHFA) publishes annual conforming loan limits that apply to all conventional loans.

As of 2025, the conforming loan limit for one-unit single-family homes is $806,500, with higher-cost areas at $1,209,750. If you need to borrow more, you must take out a jumbo loan.

The 2025 FHA loan limit for a one-unit property in a lower-cost area is $524,225, but in select high-cost areas, the ceiling is $1,209,750.

Yes, you can refinance out of an FHA loan and into a conventional one if you meet the eligibility requirements for a conventional mortgage, such as having a credit score of at least 620 and a DTI ratio below 50%.

Refinancing from an FHA loan to a conventional loan is worth considering if you want to remove FHA mortgage insurance and potentially access larger loan amounts.

You can refinance from a conventional loan into an FHA loan with two specific types of refinancing: an FHA cash-out refinance or an FHA 203(k) refinance, two options available to homeowners with any type of loan. But you typically won’t want to do so unless it’s a last resort.

When you convert into an FHA loan, you will need to pay mandatory FHA mortgage insurance charges regardless of how much equity you’ve built up. Even if the rates are lower on FHA loans, it may not make financial sense to refinance into one when you factor in MIP, FHA closing costs, and other expenses.

It depends. A conventional loan might be better if you have good or excellent credit and can manage a 20% down payment, since you’ll likely qualify for an affordable mortgage rate and avoid PMI.

However, if your credit score is between the 500s and the low 600s, a loan backed by the FHA might be your only option.

Even if you have a small down payment, it might be worth choosing a conventional loan so you don’t have to pay for FHA mortgage insurance for the life of the loan. Talk with mortgage lenders to compare overall costs and determine which mortgage makes the most sense mathematically.

Read more: Is now a good time to take out an FHA loan?

One of the biggest downsides of an FHA loan is the up-front and annual mortgage insurance, which can be tricky to get rid of. The up-front mortgage insurance premium costs 1.75% of the original mortgage principal at closing, and the annual MIP varies depending on your mortgage size, term length, and loan-to-value. Another downside to FHA loans is the loan limit. In most parts of the U.S., standard FHA loan limits are lower than conventional loan limits.

One disadvantage of a conventional loan is that the rates may be higher for people with less-than-great credit scores than for other types of mortgages. Conventional loans typically have stricter eligibility requirements than government-backed loans like FHA loans.

To some sellers, a home buyer who qualifies for conventional financing is less risky and more trustworthy than borrowers who qualify for an FHA loan. This is because conventional loans typically require a higher credit score and more money down, which means those who qualify for these loans might be considered more financially responsible and creditworthy. In addition, if a home is in less-than-perfect condition, sellers may be wary of the extra scrutiny of an FHA appraisal.

Laura Grace Tarpley edited this article.