Mortgage Types Guide

Conventional Loans

Conventional mortgages are the most common type of home loan, not backed by government agencies.

Key Features:

• Down payments as low as 3% for qualified buyers
• Minimum credit score of 620 required
• Private Mortgage Insurance (PMI) required for down payments under 20%
• Conforming loan limits vary by location ($726,200 in most areas for 2023)

Best For:

• Borrowers with good credit scores (680+)
• Those who can make a 20% down payment
• Primary residences, second homes, or investment properties

FHA Loans

Federal Housing Administration loans are government-backed mortgages designed for lower-income borrowers.

Key Features:

• Down payments as low as 3.5% with credit scores of 580+
• Down payments of 10% with credit scores between 500-579
• Mortgage Insurance Premium (MIP) required
• More flexible credit requirements

Best For:

• First-time homebuyers
• Borrowers with lower credit scores
• Those with limited down payment savings

VA Loans

Department of Veterans Affairs loans are available to service members, veterans, and eligible spouses.

Key Features:

• No down payment required
• No private mortgage insurance
• Competitive interest rates
• More flexible credit requirements
• VA funding fee may apply

Eligibility Requirements:

• 90 consecutive days of active service during wartime
• 181 days of active service during peacetime
• 6 years of National Guard or Reserve service
• Surviving spouses of service members

USDA Loans

U.S. Department of Agriculture loans promote homeownership in rural areas.

Key Features:

• 100% financing available (no down payment)
• Competitive interest rates
• Property must be in eligible rural area
• Income limits apply based on location

Best For:

• Low to moderate-income buyers in rural areas
• First-time homebuyers
• Those unable to make a down payment

Jumbo Loans

Jumbo mortgages are for loan amounts exceeding conforming loan limits.

Key Features:

• Higher down payment requirements (10-20%)
• Stricter credit requirements (usually 700+)
• Lower debt-to-income ratios required
• Higher interest rates than conforming loans

Best For:

• High-value property purchases
• Borrowers with excellent credit
• Those with significant assets and income

Fixed-Rate vs. Adjustable-Rate Mortgages

Fixed-Rate Mortgages:

• Interest rate remains constant throughout loan term
• Predictable monthly payments
• Common terms: 15, 20, or 30 years
• Best for long-term homeowners

Adjustable-Rate Mortgages (ARMs):

• Initial fixed-rate period (3, 5, 7, or 10 years)
• Rate adjusts periodically after fixed period
• Usually start with lower rates than fixed-rate mortgages
• Best for short-term homeowners or those expecting income increases