Types of Mortgages
Understanding different mortgage types is crucial for making an informed decision. Each loan type has unique requirements, benefits, and ideal use cases. Compare options below to find the best fit for your financial situation.
Quick Comparison
| Feature | Conventional | FHA | VA | USDA | Jumbo |
|---|---|---|---|---|---|
| Down Payment | 3-5% | 3.5% | 0% | 0% | 10-20% |
| Credit Score | 620+ | 580+ | 580-620 | 640+ | 700+ |
| Mortgage Insurance | PMI if <20% down | Required | None | Required | Varies |
| Loan Limits | $766,550 | $498,257 | None | Income-based | Above $766,550 |
| Property Type | Any | Primary only | Primary only | Eligible areas | Any |
| Best For | Good credit | First-time buyers | Veterans | Rural buyers | Luxury homes |
Detailed Breakdown
Best For
Buyers with good credit and stable income
Min. Down Payment
3-5%
Credit Score
620+
Loan Limit
$766,550 (2024)
Ideal For
Buyers with good credit and stable income
Flexible loan amounts and terms (15, 20, or 30 years)
No upfront mortgage insurance premium required
PMI can be removed once you reach 20% equity
Lower overall costs if you have good credit
Can be used for primary residence, second home, or investment property
Best For
First-time buyers and those with lower credit scores
Min. Down Payment
3.5%
Credit Score
580+ (500-579 requires 10% down)
Loan Limit
$498,257 (varies by county)
Ideal For
First-time buyers and those with lower credit scores
Lower down payment requirements (as low as 3.5%)
More lenient credit score requirements
Easier qualification for borrowers with past credit issues
Seller can contribute up to 6% toward closing costs
Assumable loans (buyer can take over your mortgage)
Best For
Eligible veterans, active military, and surviving spouses
Min. Down Payment
0%
Credit Score
No official minimum (most lenders require 580-620)
Loan Limit
No limit for qualified borrowers
Ideal For
Eligible veterans, active military, and surviving spouses
No down payment required for most borrowers
No private mortgage insurance (PMI) required
Competitive interest rates, typically lower than conventional
No prepayment penalties
Lenient credit requirements
Limits on closing costs you can be charged
Best For
Rural and suburban homebuyers with moderate income
Min. Down Payment
0%
Credit Score
640+ recommended
Loan Limit
Based on area income limits
Ideal For
Rural and suburban homebuyers with moderate income
No down payment required
Lower mortgage insurance costs than FHA
Competitive interest rates
Seller can pay up to 6% of closing costs
Low monthly mortgage insurance (0.35% annually)
Best For
High-income buyers purchasing expensive properties
Min. Down Payment
10-20%
Credit Score
700+
Loan Limit
Above $766,550 (2024 conforming limit)
Ideal For
High-income buyers purchasing expensive properties
Can finance luxury properties and high-cost areas
Competitive rates for qualified borrowers
Flexible loan structures available
Can be used for various property types
Which Loan Type Is Right for You?
Excellent Credit (740+) & 20% Down
→ Conventional Loan - Best rates and no PMI
Limited Down Payment & Lower Credit
→ FHA Loan - Easier qualification
Military Service
→ VA Loan - Zero down, no PMI
Buying in Rural Area
→ USDA Loan - Zero down if eligible
High-Value Property ($800K+)
→ Jumbo Loan - Exceeds conforming limits
Down Payment Impact
A larger down payment reduces your loan amount, monthly payments, and may eliminate mortgage insurance. However, it ties up cash that could be used for emergencies or investments.
Mortgage Insurance Costs
FHA loans require lifetime mortgage insurance if your down payment is less than 10%. Conventional PMI can be removed at 20% equity. VA loans have no mortgage insurance but charge a funding fee.
Interest Rate Differences
VA loans typically offer the lowest rates, followed by conventional loans for well-qualified borrowers. FHA and USDA rates are competitive but include insurance costs.
Property Requirements
Government-backed loans (FHA, VA, USDA) have stricter property standards and appraisal requirements. Conventional and jumbo loans offer more flexibility.