Every major loan category explained clearly. What it is, who it's for, and what to watch out for.
Conventional mortgages are the most common home loan. They're not backed by a government agency and typically require stronger credit and a down payment of at least 3% to 20%. Rates on conventional loans are sensitive to credit score, debt-to-income ratio, and loan-to-value. The conforming loan limit changes annually and affects whether a loan qualifies for standard secondary market guidelines.
Fixed-rate conventional mortgages offer predictable payments for 10, 15, 20, or 30-year terms. Adjustable-rate conventional loans (ARMs) offer lower initial rates that reset at defined intervals, creating payment risk if rates rise. Coventry Enterprises LLC reviews both types, with particular attention to ARM adjustment mechanics, caps, and floors.
FHA loans are insured by the Federal Housing Administration and allow lower down payments (as low as 3.5%) and more flexible credit requirements than conventional loans. They're designed to make homeownership accessible to buyers who might not qualify for conventional financing. The tradeoff is mandatory mortgage insurance: both an upfront premium and annual MIP that persists for the life of the loan if the down payment is under 10%.
The MIP structure means FHA loans can be more expensive over time than they initially appear. Coventry Enterprises LLC reviews FHA loan costs in full, including the lifetime MIP obligation, and compares total cost against conventional alternatives when the borrower might qualify for both.
VA loans are available to eligible veterans, active-duty service members, and surviving spouses. They're backed by the Department of Veterans Affairs and offer significant advantages: no down payment required, no private mortgage insurance, and competitive interest rates. The VA funding fee can be financed into the loan and varies based on service history and down payment amount.
VA loans have specific property and occupancy requirements. The borrower must intend to use the property as their primary residence. VA appraisals are more thorough than conventional appraisals and can flag property condition issues that standard appraisals might overlook.
Jumbo loans exceed the conforming loan limits set annually by the Federal Housing Finance Agency. Because they can't be sold to the secondary market under standard guidelines, jumbo loans are held or securitized differently, and lenders apply stricter standards: stronger credit scores, lower debt-to-income ratios, larger reserves, and typically higher rates.
Jumbo ARM loans are common in high-cost markets. The initial rate can appear attractive, but borrowers who don't plan carefully around the reset period face significant payment increases. Coventry Enterprises LLC reviews jumbo loan terms with particular focus on rate adjustment mechanics, reserve requirements, and the full underwriting picture.
Construction loans fund the building of a new structure. They're short-term, usually 12 to 18 months, and funds are disbursed in draws as construction milestones are completed. Interest is charged only on the amount disbursed, not the full loan amount. After construction completes, the loan either converts to a permanent mortgage or requires refinancing.
Construction loans have layers of complexity that standard mortgages don't. Draw schedules, inspection requirements, lien waiver procedures, builder approval processes, and interest reserve calculations all need to be understood before the project begins. See our dedicated construction loan guide for a full breakdown.
Bridge loans are short-term financing tools that cover a gap between two transactions or financing situations. Common uses include buying a new property before the current one sells, financing a value-add acquisition while transitioning to permanent debt, or carrying a construction project through stabilization. Terms are typically 6 to 24 months with interest-only payments.
The short term and higher cost of bridge financing means the exit strategy has to be realistic. If the sale, refinance, or stabilization event that was supposed to pay off the bridge loan doesn't happen on schedule, extension fees and default risk mount quickly. Coventry Enterprises LLC reviews bridge loan terms against the specific exit plan before a client commits.
Hard money loans are asset-based, short-term loans typically issued by private lenders. They're evaluated primarily on the value of the property rather than the borrower's creditworthiness. Rates are substantially higher than conventional financing, points are charged upfront, and terms are short. They're used in fix-and-flip projects, distressed property acquisitions, and situations where speed and certainty of close matter more than cost.
The high cost of hard money makes exit strategy the most critical element of any deal. A property that takes six extra months to sell or refinance than expected can absorb all the projected profit in interest charges alone. Coventry Enterprises LLC calculates total cost at multiple holding periods before clients commit to hard money financing.
A Home Equity Line of Credit is a revolving credit line secured by the equity in a home. The draw period, typically 10 years, allows the borrower to draw and repay funds as needed, paying interest only on the outstanding balance. After the draw period ends, the repayment period begins and the balance amortizes over the remaining term.
Most HELOCs carry variable rates tied to an index like the prime rate. When rates rise, so do HELOC payments, sometimes significantly. The rate change isn't always well understood by borrowers who focus on the initial low-rate period. Coventry Enterprises LLC reviews HELOC terms including the rate index, margin, lifetime cap, and what happens at the end of the draw period.
Reverse mortgages allow homeowners aged 62 and older to borrow against their home equity without making monthly payments. The loan balance grows over time as interest accrues and is repaid when the borrower sells the home, moves out, or passes away. The most common type is the Home Equity Conversion Mortgage, which has federal oversight and specific borrower protections.
Reverse mortgages are often misunderstood. The borrower retains title to the home and is responsible for property taxes, insurance, and maintenance. Failing to meet those obligations can trigger default. Coventry Enterprises LLC reviews reverse mortgage terms to ensure borrowers understand the total implications before committing.
Business loans cover a wide range of financing products: term loans, revolving lines of credit, equipment financing, merchant cash advances, and invoice factoring. The terms, costs, and risk profiles vary enormously. A conventional bank term loan and a merchant cash advance are both technically business loans, but they operate completely differently and carry very different cost structures.
Coventry Enterprises LLC evaluates business loan terms with attention to effective annual rate, repayment structure, prepayment provisions, and personal guarantee requirements. Many business borrowers don't realize their personal assets may be at risk through guarantee provisions even when the loan is in a business entity's name.
Small Business Administration loans are government-backed loans offered through participating lenders. The SBA 7(a) program is the most common, offering longer terms and lower down payments than conventional business loans for eligible businesses. SBA 504 loans finance commercial real estate and large equipment purchases with fixed rates on the SBA portion.
SBA loans come with significant paperwork requirements, longer processing times, and specific use-of-proceeds rules. The personal guarantee requirement is standard. Collateral requirements can include personal real estate. Understanding what you're pledging before signing an SBA loan agreement is important.
Commercial real estate loans finance income-producing properties: office buildings, retail centers, industrial facilities, and multi-family complexes. They differ from residential mortgages in amortization structure, prepayment provisions, covenant requirements, and recourse. Balloon payments at 5 to 10 years are standard. Prepayment structures like yield maintenance and defeasance can make early exit extremely expensive.
Commercial loans are evaluated primarily on the income the property generates relative to the debt service obligation. Lenders underwrite DSCR, LTV, and debt yield. Covenants can require ongoing DSCR maintenance and trigger default if property performance declines. See our commercial lending analysis service for more detail.
Investment property loans cover financing for residential properties held for rental income rather than owner occupancy. They carry higher rates and stricter underwriting requirements than owner-occupied residential mortgages. DSCR loans have become a popular alternative for investors who prefer asset-based qualification over personal income documentation. Conventional investment property loans require 15% to 25% down payment depending on property type.
Coventry Enterprises LLC works extensively with real estate investors on this category. See our detailed guide at real estate investment financing for a full breakdown of options.
Land loans finance raw or improved land without a structure on it. They're among the hardest loans to place because the collateral is illiquid and has no income stream. Lenders require larger down payments, charge higher rates, and offer shorter terms than standard real estate loans. Raw land (no utilities, no approved plans) is more difficult to finance than improved lots with entitlements and infrastructure.
Land loans often require the borrower to have a clear development plan and a path to converting the land into a productive, income-generating asset. Carrying costs on land can accumulate quickly, particularly if the development timeline extends beyond the original plan.