Choosing the right mortgage type is as important as getting the lowest rate. The wrong loan type can cost you tens of thousands over the life of your loan. Here's a complete overview of every major mortgage product.
Conventional Loans
The most common mortgage type, not backed by any government agency. Conforms to Fannie Mae and Freddie Mac guidelines. Best for borrowers with good credit and stable employment.
- Min credit: 620 (740+ for best rates)
- Down payment: 3–20%
- No upfront MIP (unlike FHA)
- PMI removable at 20% equity
- Best for: borrowers with good credit who want flexibility
FHA Loans
Backed by the Federal Housing Administration. More forgiving credit and DTI requirements make this popular with first-time buyers.
- Min credit: 580 (3.5% down) or 500 (10% down)
- Down payment: 3.5%
- Upfront MIP: 1.75% of loan
- Annual MIP: 0.55%–1.05% (often for life of loan)
- Best for: lower credit scores, high DTI, or limited savings
VA Loans
Available only to eligible veterans, active duty service members, and surviving spouses. One of the best mortgage products available — often the optimal choice for those who qualify.
- No down payment required
- No PMI
- Competitive rates (often below conventional)
- Funding fee: 1.4%–3.6% (waived for disabled veterans)
- Best for: veterans and service members — use this benefit!
USDA Loans
Backed by the US Department of Agriculture for properties in eligible rural and suburban areas. Check USDA's property eligibility map — many suburban areas qualify.
- No down payment required
- Income limits apply (typically 115% of area median income)
- Upfront guarantee fee: 1% of loan
- Annual fee: 0.35% (much less than FHA MIP)
- Best for: moderate-income buyers in eligible areas
Jumbo Loans
For loan amounts exceeding conforming limits ($766,550 in most areas; $1,149,825 in high-cost areas in 2024). Lenders take on more risk, so requirements are stricter.
- Down payment: 10–20%
- Credit score: 700+ (720+ preferred)
- Large cash reserves required
- Rates comparable or slightly above conforming
- Best for: high-cost markets where conforming limits are insufficient
Adjustable-Rate Mortgages (ARMs)
ARMs have an initial fixed period (3, 5, 7, or 10 years), then adjust annually based on a market index plus a margin. Lower initial rates make them attractive when rates are high or if you plan to sell/refinance before adjustment.
- 5/1 ARM: Fixed for 5 years, adjusts annually thereafter
- Rate caps: Periodic cap (max change per adjustment) and lifetime cap (max total change)
- Best for: buyers who will move or refinance within 5–10 years