In addition to type of insurer and method of charging interest, another key characteristic of mortgages is based on the size of the loan. This determines if the mortgage is considered a conforming or a jumbo loan.
Conforming mortgage loan
There are legal limits on how large a loan Fannie Mae and Freddie Mac can insure. These limits change over time and for 2017 the limit in most of the country is $424,100, though it is higher in certain high-cost areas (i.e., Hawaii and Alaska and a few federally designated high-cost markets, where the limit is $636,150). Loans within these limits are considered conforming loans.
The ability to have Fannie Mae or Freddie Mac insure your mortgage can have a big effect on your ability to get a loan and on the amount of interest you pay. So, it is a good idea to be aware of the conforming loan limits in your target buying area, because it may be to your advantage to stay within those limits.
Jumbo mortgage loan
Suppose you have your sights set on a particularly lavish property, or live in a part of the country where home prices generally have soared through the conventional loan limits. If you plan to borrow above those limits, you need to find a jumbo loan.
Without mortgage insurance available from Fannie Mae, Freddie Mac or the government, jumbo loans represent a bigger risk to lenders. Many will still make those loans, but it is likely to cost you in the form of a higher interest rates. Also, expect lenders to mitigate their risks by requiring a larger down payment and demanding tougher qualifying standards for credit and debt-to-income ratios (DTIs).
All of this may be for the best. It is perfectly fine to want a more expensive house, but these higher hurdles will help make sure you can really afford it in terms of credit history and resources.