What is a limitation of government-backed loans compared to conventional loans?

Government-backed loans, such as those insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA), have specific legal limits on the amount that can be borrowed. These limits are put in place to maintain the program's integrity and ensure that funds are available for a diverse range of borrowers. This means that, while these loans may be more accessible to first-time homebuyers or those with less-than-perfect credit, they may not allow for larger loan amounts that might be required for more expensive properties.

In contrast, conventional loans do not have these same government-imposed limits, giving lenders more flexibility to offer higher loan amounts as long as the borrower meets other criteria, such as income and creditworthiness. Therefore, the constraints set by the government on loan amounts in government-backed loans represent a significant limitation for borrowers who might need to finance properties above those thresholds.