If, however, your credit score is under 620, you usually will not be able to qualify for a conventional loan. Lenders will also scrutinize your debt-to-income ratio (DTI). You may not qualify for a conventional mortgage if more than 36% of your monthly income is tied up in debt payments.

Previously, lenders required borrowers to make a 20% down payment. But now, most lenders will allow less if you have a solid income and great credit. For a conventional mortgage, you can now make a down payment for as little as 3%. Paying less than 20%, however, will require you to pay private mortgage insurance (PMI), at least until the balance of your mortgage is 80% or under the value of the property.

If you make a lower down payment, you could also wind up paying a higher interest rate. Since paying PMI and more on the interest rate will mean you pay more on the overall cost of the loan, you will have to decide whether paying a smaller down payment is worth it.

2: Jumbo loan

Conventional loans generally break down into conforming and non-conforming loans. A conforming loan means it conforms to government limits that are designed to stabilize the housing market. Non-conforming loans—or jumbo loans—exceed those limits.

What qualifies as a jumbo loan, however, differs depending on the market. This is because the cost of housing in some markets is simply more on average than in other markets.