The mortgage world can be a bit overwhelming with all the different options out there, but don't worry — here it is broken down into the most common loan types and what you need to know.
Conventional Loans
Who's it good for? Buyers with a strong credit score (at least 620), a steady income, and a manageable debt-to-income ratio.
- The most common type of loan — not backed by the government, offered by banks and private lenders
- Down payment: typically 3% to 5%, especially for first-time buyers; put down 20% and you avoid private mortgage insurance (PMI)
- Rates: avoid PMI and you'll likely get a lower interest rate than other loan types — the better your credit and the bigger your down payment, the better your rate
FHA Loans (Federal Housing Administration)
Who's it good for? Buyers with lower credit scores (down to 580 for maximum financing) or those who have trouble saving a large down payment. Popular with first-time buyers.
- Government-backed loan designed for buyers without perfect credit or big savings
- Down payment: just 3.5% minimum
- Rates: typically higher than conventional, plus monthly mortgage insurance (MIP) — but often a good trade-off for those with less-than-perfect credit
VA Loans (Veterans Affairs)
Who's it good for? Active-duty military, veterans, and qualified surviving spouses.
- One of the most attractive loan options for those who've served
- Down payment: none required — 0% down
- Rates: tend to be lower than conventional because they're government-backed, and there's no PMI
USDA Loans (U.S. Dept. of Agriculture)
Who's it good for? Buyers purchasing in rural or suburban areas who meet certain income requirements.
- Designed to help low- to moderate-income buyers in rural and suburban areas
- Down payment: 100% financing — no down payment required
- Rates: typically lower than conventional, though there's a guarantee fee and an annual fee that add a little to the monthly cost
Jumbo Loans
Who's it good for? Buyers purchasing a high-priced home that exceeds conforming loan limits (typically above $726,200, though it can be higher in expensive markets).
- Used when the loan amount exceeds conventional conforming limits
- Down payment: generally 20% or more, though some programs allow less
- Rates: often higher because the lender takes on more risk — strong credit and a large down payment help you secure a competitive rate