Types of Home Loans: A Guide to Mortgage Options
Compare FHA, VA, USDA, and conventional loans to find the right mortgage for your budget, credit score, and home ownership goals.
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Written byMandy Sleight
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Mandy SleightInsurance Writer
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Edited byLequita Westbrooks
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Lequita WestbrooksSenior Editor
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Reviewed byMacK Korris
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MacK KorrisLicensed P&C Insurance Agent and Expert Fact-Checker
Licensed property and casualty insurance agent
NPN: 21630969
Updated
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When choosing a home loan, you’ll pick a loan program and an interest rate structure. Lenders offer a variety of home loan options, including Federal Housing Administration (FHA), Veterans Affairs (VA), U.S. Department of Agriculture (USDA), and conventional loans. You’ll also choose whether your loan is a fixed-rate or adjustable-rate mortgage (ARM).
Most borrowers choose the type of mortgage loan first, then the rate structure. Understanding how both work makes it easier to narrow down your choices and find the best fit for your budget.
Eligibility varies by loan program and depends on factors like your credit score, income, debt, military status, and where you plan to buy.
Key Takeaways
Conventional loans come from private lenders and usually require good credit and a larger down payment. That said, they offer flexible loan terms and interest rate options.
FHA, USDA, and VA loans reduce lender risk through government backing, which makes them easier to qualify for than conventional loans.
Fixed-rate mortgages keep the same interest rate for the life of the loan, while adjustable-rate mortgages have lower interest rates that can change over time.
Compare the Main Types of Home Loans
Check out the table below to see how different loan options compare and who each is best for.[1][2][3][4]
Loan Type  | Minimum Required Credit Score | Down Payment | Key Benefit | Best for |
|---|---|---|---|---|
| Conventional | 620 | 3%–20% | Competitive interest rates | Strong-credit borrowers |
| FHA | 580+
500–579 | 3.5% (higher scores) 10% (lower scores) | Easier to qualify | First-time homebuyers |
| VA | No set minimum, but lenders prefer at least 620 | 0% | No private mortgage insurance (PMI) requirement | Active-duty service members and veterans |
| USDA | No minimum, but scores of less than 640 may require a manual review | 0% | No down payment | Low- to moderate-income rural borrowers |
| Jumbo | 700 | 10%–20% | High loan limits | Expensive home purchases |
| Fixed-rate | 620 | 3%–20% | Predictable monthly payments | Long-term homeowners |
| ARM | 620 | 3%–20% | Lower initial rate | Short-term plans or investment properties |
Conventional, FHA, USDA, and VA loans are different mortgage loan products available to homebuyers. Adjustable-rate and fixed-rate describe how the interest rate works.
Both matter when shopping for a home loan. Your credit history, down payment amount, income, and purchase price determine which mortgage product you qualify for. The rate structure determines your monthly mortgage payment.
Most borrowers choose a loan type first, then select a rate option, such as a 30-year fixed-rate mortgage or an adjustable-rate mortgage.
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Conventional loans
Pros
Flexible loan terms and property types
Lower interest rates with strong credit
No up-front mortgage insurance
Cons
Higher credit score requirements
Low down payments require PMI
Stricter debt-to-income ratio (DTI) limits
Conventional mortgages are loans that don’t have government backing, which can make them harder to qualify for. Private lenders typically require a minimum credit score of 620, a stable income, and a maximum DTI of around 36%–45%, depending on your financial profile.[5]
Down payments can be as low as 3%, but putting down at least 20% helps you avoid private mortgage insurance (PMI). PMI is mortgage insurance you pay for that protects the mortgage lender if you default on your loan payments.
FHA loans
Pros
Lower credit score requirements
Smaller down payment
Low closing costs
Cons
Mortgage insurance required
Must pay for an FHA appraisal
Maximum loan limits
Because the Federal Housing Administration insures FHA loans, lenders lower their eligibility requirements, making it easier for more people to qualify for homeownership.
You can get an FHA loan with as little as 3.5% down and a credit score of 580. But you’ll pay up-front and monthly mortgage insurance premiums, which protect the lender if you can’t repay the loan.
Easier qualifications make FHA loans popular with first-time homebuyers and borrowers with lower credit scores. Government backing also means they typically offer lower interest rates than conventional loans.
VA loans
Pros
No down payment required
No monthly mortgage insurance
Competitive interest rates
Cons
Limited to eligible borrowers
Funding fee may apply
Property requirements can be strict
The U.S. Department of Veterans Affairs guarantees VA loans, which offer zero down payment, no mortgage insurance, and competitive interest rates. VA loans are available through private lenders to eligible service members, veterans, and some surviving spouses.
You’ll need to get a certificate of eligibility (COE) that confirms you qualify for a VA home loan benefit from your lender or the VA. The home must meet minimum property requirements to ensure it’s sanitary, safe, and structurally sound.
USDA loans
Pros
No down payment required
No set minimum credit score
Fixed interest rate
Cons
Can’t qualify for other programs
Income and loan limits apply
Must pay an annual guarantee fee
USDA loans have backing from the U.S. Department of Agriculture and are best for low- to moderate-income borrowers buying homes in eligible rural areas. They offer competitive fixed rates and don’t require a down payment.
Still, you must meet income limits and buy in an eligible rural location. The home must also be your primary residence. Borrowers pay up-front and annual guarantee fees, which are similar to mortgage insurance.
Jumbo loans
Pros
Higher borrowing limits
Finance luxury or high-cost homes
Flexible property and loan options
Cons
Higher credit requirements
Potentially higher interest rates
May require two appraisals
Jumbo loans are mortgages that exceed Fannie Mae and Freddie Mac conforming loan limits. The Federal Housing Finance Agency (FHFA) sets loan limits each year, with most areas capped at $832,750, and up to $1,249,125 in high-cost regions. These non-conforming loans help finance higher-priced homes.
Lenders typically have stricter underwriting requirements, like a minimum credit score of 700 and a DTI of 43% or less, but they’re more flexible if you have healthy cash reserves. You’ll likely receive a higher interest rate than a conforming loan, especially if you make a down payment below 20%.
Home Loan Requirements by Type
Each loan type has different requirements for credit score, down payment, and DTI ratio. Your DTI is the percentage of your gross monthly income that goes toward debt repayment. These lender requirements determine which loans you qualify for and how much you can borrow.
The following table shows mortgage requirements by home loan type.[6]
Loan Type | Minimum Credit Score | Minimum Down Payment | DTI Ratio | Income Limits |
|---|---|---|---|---|
| Conventional | 620 | 3% | Up to 45% | None |
| FHA | 580+
500–579 | 3.5% (higher scores) 10% (lower scores) | Up to 43% | None |
| VA | No set minimum, but lenders prefer at least 620 | 0% | Up to 41% | None |
| USDA | No minimum, but scores of less than 640 may require a manual review | 0% | Up to 41% | Varies by family size, county, and state |
| Jumbo | 700 | 10% | Up to 43% | None |
Some lenders will approve home loans with a DTI as high as 50% if you have substantial cash reserves or assets.
Fixed-Rate vs. Adjustable-Rate Mortgages
Your interest rate structure plays a big role in your monthly payment and lifetime loan costs. Most lenders offer both fixed-rate and adjustable-rate options for each loan type, though you can only get fixed-rate loans through the USDA.
Here’s how each rate structure differs.
Fixed-rate loans
Pros
Easier to budget long term
Protection from rising interest rates
Cons
Rates may be higher
Must refinance to get lower rates
With a fixed-rate loan, your interest rate stays the same for the entire term — usually 15 or 30 years. Your monthly principal and interest payment doesn’t change, which makes budgeting easier. It’s also easier to estimate your total loan cost up front.
Fixed-rate loans frontload the interest, meaning you pay the most interest early in the loan. More of your monthly payment goes toward principal as you continue to make on-time payments.
Adjustable-rate mortgages (ARMs)
Pros
Lower starting interest rate
May qualify for a larger loan amount
Cons
Rates can adjust once or twice per year
Future interest rates can be high
An adjustable-rate mortgage starts with a lower fixed rate for an initial period, then adjusts periodically based on interest rate trends. For example, with a 5/1 ARM, your interest rate stays the same for five years, then it can change once per year after that.
Your monthly payment can rise or fall over time, which affects your total loan cost. ARMs can save money up front, but your monthly payment could increase later if rates rise.
How to Choose the Right Home Loan
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Choosing the right home loan starts with a close look at your financial situation. Consider these factors as you compare options:
Check your credit score. You’ll likely need a higher score to qualify for a conventional loan than for government-backed loans.
Decide on a down payment. Your down payment affects which loans you qualify for and whether you’ll pay mortgage insurance.
Look at your income and DTI. Lenders use your DTI to determine how much you can afford to borrow.
Consider your location. Some programs, like USDA loans, apply only to certain areas.
Think about how long you’ll stay. How long you plan to stay in the home can help you decide whether a fixed-rate loan or an ARM is the right choice.
Once you assess your personal finances, match them to the loan type that fits best:
Conventional loans: Borrowers with strong credit and stable income
FHA loans: First-time homebuyers and borrowers with lower credit scores
VA loans: Active-duty military and veterans
USDA loans: Low- to moderate-income buyers in eligible rural areas
Jumbo loans: High-value home purchase
It’s a good idea to compare pre-approval offers from multiple lenders to see which loan type gives you the best rates and terms for your situation.
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Types of Home Loans FAQs
We answered common questions borrowers ask about home loan types and eligibility.
What are the main types of mortgages?
The main types of mortgages available are conventional, FHA, USDA, VA, and jumbo loans. Each has different eligibility requirements, benefits, and limits, as well as fixed-rate or adjustable-rate payment options.
Can you get a loan on SSDI?
Yes. People on Social Security Disability Insurance (SSDI) can get a home loan if they meet the lender’s other qualifications. You’ll likely need to provide a benefit verification letter from the Social Security Administration (SSA) to verify your income.
What are conventional loans?
Private lenders offer conventional loans without government backing. These loans typically require higher credit scores and down payments than government-backed loans. But they can offer competitive rates and flexible terms for well-qualified borrowers.
What are jumbo loans?
Jumbo loans are non-conforming mortgages for higher-priced homes that exceed conforming loan limits. They usually require strong credit, cash reserves, and larger down payments.
Who are government-backed loans for?
Government-backed loans are for people who need more relaxed credit requirements and lower down payments. People with low income, first-time homebuyers, past and present military members, and other disadvantaged groups may qualify for government-backed loans.
Sources
- Consumer Financial Protection Bureau (CFPB). "What kind of down payment do I need?."
- U.S. Department of Housing and Urban Development (HUD). "HUD Handbook 4155.1: Mortgage Credit Analysis for Mortgage Insurance."
- U.S. Department of Veterans Affairs (VA). "VA Home Loan Buyer’s Guide."
- U.S. Department of Agriculture Rural Development (USDA Rural Development). "Single Family Housing Guaranteed Loan Program."
- Fannie Mae. "Selling Guide: B3-6-02, Debt-to-Income Ratios."
- Federal Deposit Insurance Corporation (FDIC). "Affordable Mortgage Lending Guide, Part I: FHA 203(b) Mortgage Insurance Program."
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Mandy SleightInsurance Writer
Lequita WestbrooksSenior Editor
MacK KorrisLicensed P&C Insurance Agent and Expert Fact-Checker
Licensed property and casualty insurance agent
NPN: 21630969
