Conventional loan products allow borrowers to apply for higher loan amounts. For single family homes, the amount in El Paso County, Colorado goes up to $484,350. The loan limit increases for 2-unit, 3-unit, and 4-unit properties where it reaches more than $800,000.

Down payment requirements also depend on the type of conventional loan. Normally, 20-percent down is standard and advisable. But the down payment may be reduced to 5 percent or lower. For example, the Conventional 97 loan requires a 640+ credit score and only 3 percent down. At times these borrowers must keep money in reserve.

Mortgage insurance costs are less expensive with conventional loans. Lenders look at loan-to-value ratios. Private mortgage insurance (PMI) is optional for buyers who put down at least 20 percent. Money can be saved down the line. PMI is also optional after any mortgage is paid down to 70 percent of the home’s value.

Some borrowers run into snags with conventional loans. Those people take a harder look at the large down payments. But they might also find it more difficult to qualify for a conventional loan, especially since a higher credit score is necessary. In addition, interest rates are higher with conventional loans. This is mostly because the loan amounts can be higher and therefore riskier for lenders.

Large down payments and higher interest rates deter some folks from choosing conventional loan products. So, they look to the FHA loans.