Types of Mortgage Loans Explained: Conventional, FHA, VA, and More

Why Loan Type Matters

Choosing the right mortgage is about more than just the interest rate. Different loan types have their own eligibility rules, down payment requirements, mortgage insurance costs, and rate structures. The type you pick can affect how much you need upfront, what monthly payments might look like, and how easy it is to qualify.

Most homebuyers choose between conventional loans and loans insured by government agencies like the FHA, VA, and USDA. Jumbo loans cover amounts above conforming limits. This guide explains the main differences so you can identify which loan types are available and what key criteria to compare.

Sources: Consumer Financial Protection Bureau, Charles Schwab

Conventional Loans

Conventional loans are mortgages that are not guaranteed or insured by a federal agency. They typically conform to standards set by Fannie Mae and Freddie Mac, which means they must meet certain loan limits and underwriting guidelines. These loans are a common choice for borrowers with good credit and a solid down payment.

For conventional loans, a minimum credit score of around 620 is typically required, and the minimum down payment is 3% to 5% of the purchase price. If your down payment is less than 20%, you will usually need to pay for private mortgage insurance (PMI). Because PMI protects the lender, it is an added cost you may be able to avoid by putting down 20% or more.

Conventional loans come with options for fixed or adjustable interest rates, and they can be easier to compare across lenders because the qualification criteria are fairly standard.

Sources: Charles Schwab, PNC Bank, The Mortgage Reports

FHA Loans

FHA loans are insured by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development. They are designed to help borrowers who might not qualify for a conventional loan, often because of a lower credit score or a smaller down payment.

For a borrower with a credit score of 580 or higher, the minimum down payment is just 3.5%. Some lenders accept credit scores as low as 500 if you can put down 10%. Because the FHA insures the loan, lenders are generally willing to offer more flexible terms.

FHA loans require you to pay mortgage insurance premiums—both an upfront premium and an annual premium. This insurance is required for the life of most FHA loans, so it's an important cost to factor in.

Sources: Capital Bank, PNC Bank, Academy Bank

VA Loans

VA loans are available to eligible military service members, veterans, and surviving spouses. They are guaranteed by the U.S. Department of Veterans Affairs, which allows lenders to offer favorable terms.

One of the biggest benefits is that VA loans can require no down payment at all for eligible borrowers. There is no private mortgage insurance (PMI) requirement, although a VA funding fee may apply. The underwriting is often flexible, and there is no set minimum credit score—though individual lenders may have their own standards.

Because VA loans are backed by the government, they often have lower interest rates compared to conventional loans. That can make them an attractive option for those who qualify.

Sources: Capital Bank, PNC Bank, Academy Bank

USDA Loans

USDA loans are designed to help homebuyers in eligible rural and suburban areas. They are guaranteed by the U.S. Department of Agriculture and come with a major benefit: no down payment is required.

To qualify, you generally need to be purchasing a home in an area that USDA considers rural or suburban, and your household income must fall within certain limits. A typical minimum credit score is 640, though some lenders may require a higher score or additional compensating factors.

USDA loans require an upfront guarantee fee and an annual fee, which function similarly to mortgage insurance. These fees help fund the program and are an important part of the loan's cost.

Sources: Charles Schwab, PNC Bank, The Mortgage Reports

Jumbo Loans

Jumbo loans are mortgages that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). If you need to borrow more than the conforming limit in your area, a jumbo loan is the route to take.

Because jumbo loans cannot be sold to Fannie Mae or Freddie Mac, they are considered riskier for lenders. As a result, they often come with higher interest rates and stricter requirements. You will typically need a credit score of 700 or higher and a down payment of at least 10% to 20%, and lenders may also require larger cash reserves.

Jumbo loans are available as both fixed-rate and adjustable-rate mortgages, and they can be a good fit for high-priced homes, but the borrowing costs are usually higher than for conforming loans.

Sources: Charles Schwab, PNC Bank, Bankrate

Other Specialized Programs

Beyond the major types covered above, there are other specialized mortgage programs that may be available depending on where you live and your financial situation. These can include state or local down payment assistance programs, loans for first-time homebuyers, and renovation loans.

Because these programs vary widely by location and may change over time, it's best to check with a local lender or housing counselor to see what options are available in your area. The eligibility requirements and benefits can differ, so it pays to ask about programs you might not have considered.

Sources: Consumer Financial Protection Bureau, Charles Schwab

Side-by-side category

This table summarizes typical requirements for each loan type based on the research available. Use it as a starting point for comparing loan programs, and remember that individual lenders may have slightly different standards.

Sources: Charles Schwab, Capital Bank, PNC Bank, Bankrate

How to Choose a Loan Type

When deciding which mortgage loan type is right for you, start by looking at your credit score, available down payment, and the price of the home you're considering. If you have strong credit and can put down at least 5%, a conventional loan might be a good fit. If your credit score is lower or you need a smaller down payment, FHA loans could offer a path. If you qualify for a VA or USDA loan based on your service or the home's location, those programs can save you money on a down payment and possibly lower rates as well.

It's also important to think about the long-term costs, including mortgage insurance and interest rates. Compare quotes from multiple lenders, because rates and fees can vary. And be sure to consider how long you plan to stay in the home—that can affect whether a fixed or adjustable rate makes more sense.

• Check your credit score and pull your reports
• Save for a down payment, if needed
• Determine the home price and whether it exceeds conforming limits
• Talk to lenders about loan options and get rate estimates
• Compare the total cost of each loan type, not just the rate

Sources: Consumer Financial Protection Bureau, Charles Schwab