If you’re buying a home, picking the right type of mortgage can save you tens of thousands of dollars over the life of the loan. But “what type of mortgage should I get?” is actually two questions in one: who’s backing the loan (conventional vs government) and how the interest rate works (fixed vs adjustable). Once you understand both, the right answer usually becomes obvious.
Before comparing loan types in detail, it helps to know what you can afford overall. Run your numbers through our free home affordability calculator — it covers conventional, FHA, VA, and custom scenarios so you can see how each loan type affects your monthly payment.
The two big mortgage categories
Every mortgage falls into one of two buckets:
- Conventional loans — Not backed by the government. Issued by banks, credit unions, and mortgage lenders.
- Government-backed loans — Insured or guaranteed by the federal government (FHA, VA, USDA).
On top of that, every loan has a rate structure (fixed or adjustable) and a loan size category (conforming or jumbo). The combination of those three things is your “loan type.”
Conventional loans
Conventional loans are the most common mortgages in the US. They’re issued by private lenders and aren’t directly insured by the government. Most conform to guidelines set by Fannie Mae and Freddie Mac — two government-sponsored enterprises that buy mortgages on the secondary market.
Key features
- Down payment: 3% to 20%+
- Credit score: Typically 620 minimum
- PMI: Required if down payment < 20%, removed at 80% LTV
- DTI: Usually up to 45%, sometimes 50% with strong profile
- Loan limits: $766,550 in most counties (2026); higher in expensive areas
Best for
Buyers with good credit (620+), stable income, and at least 5% down who want flexible loan terms and the ability to drop mortgage insurance later.
Sub-types
- Conventional 97 — 3% down for first-time or low-income buyers
- HomeReady (Fannie Mae) — 3% down with income limits
- Home Possible (Freddie Mac) — 3–5% down with income limits
- Standard conventional — 5%+ down, no income cap
FHA loans
FHA loans are insured by the Federal Housing Administration. They’re designed for buyers who can’t qualify for conventional financing — whether because of lower credit, smaller down payments, or harder-to-document income.
Key features
- Down payment: 3.5% (credit ≥ 580) or 10% (credit 500–579)
- Credit score: 500 minimum
- Mortgage insurance: Upfront MIP (1.75%) + monthly MIP for life of loan (if <10% down)
- DTI: Up to 50% with compensating factors
- Loan limits: Vary by county ($524,225 to $1,209,750 in 2026)
Best for
First-time buyers, anyone with credit below 620, and buyers with a small down payment. Also great for “house hackers” buying 2–4 unit properties they’ll live in.
VA loans
VA loans are guaranteed by the US Department of Veterans Affairs. They’re reserved for active-duty military, veterans, eligible reservists and National Guard members, and qualifying surviving spouses. In our opinion, they’re the best mortgage product in America — if you qualify.
Key features
- Down payment: 0%
- Credit score: No set minimum (most lenders want 580–620)
- Mortgage insurance: None
- Funding fee: 1.25% to 3.3% one-time (can be rolled into loan; waived for disabled veterans)
- DTI: No hard cap, but most lenders prefer ≤ 41%
- Loan limits: No limit on VA loan size for eligible borrowers with full entitlement
Best for
Any eligible veteran or service member. No PMI, no down payment, and competitive rates. There is literally no reason for an eligible buyer to choose any other product.
USDA loans
USDA loans are backed by the US Department of Agriculture. They’re designed for rural and some suburban homebuyers with modest incomes.
Key features
- Down payment: 0%
- Credit score: Usually 640+
- Mortgage insurance: Smaller “guarantee fee” instead of PMI
- Income limits: Household income capped at 115% of area median
- Location limits: Property must be in a USDA-eligible area
Best for
Buyers in qualifying rural and suburban areas who meet the income limits. You’d be surprised how many areas qualify — check the USDA map before assuming you’re out.
Jumbo loans
A jumbo loan is any mortgage above the conforming loan limit ($766,550 in most counties, higher in expensive markets). Because they’re too big for Fannie Mae and Freddie Mac to buy, they come with stricter underwriting.
Key features
- Down payment: 10–20%+
- Credit score: Usually 700+, often 720–740
- Cash reserves: 6–12 months of payments required in savings
- Rates: Can be slightly higher than conforming loans, sometimes lower
- DTI: Typically 43% max
Best for
Buyers purchasing expensive homes in high-cost markets (Bay Area, NYC, LA, Miami, etc.) with strong credit and cash reserves.
Fixed-rate vs adjustable-rate mortgages
Once you’ve picked who’s backing the loan, you need to pick how the interest rate works.
Fixed-rate mortgage
Your interest rate stays the same for the entire life of the loan. Your monthly payment (principal and interest) never changes.
- Common terms: 30-year, 20-year, 15-year, 10-year
- Best for: Buyers who plan to stay in the home 7+ years and want predictability
- Pros: Simple, stable, budget-friendly
- Cons: Slightly higher starting rate than ARMs
Adjustable-rate mortgage (ARM)
Your interest rate is fixed for an initial period (usually 5, 7, or 10 years), then adjusts every year based on a market index. Payments can go up or down.
- Common terms: 5/1, 7/1, 10/1 ARM (fixed for 5/7/10 years, then annual adjustments)
- Best for: Buyers who plan to sell or refinance before the fixed period ends
- Pros: Lower starting rate; more home for the same payment in the early years
- Cons: Rate can rise significantly after the fixed period
Conforming vs non-conforming loans
- Conforming — Meets Fannie Mae / Freddie Mac guidelines and loan limits. Most conventional loans are conforming.
- Non-conforming — Doesn’t meet conforming guidelines. Includes jumbo loans, non-QM loans, and certain portfolio loans held by the originating lender.
Special-purpose loan types
FHA 203(k) renovation loan
An FHA loan that rolls purchase price plus renovation costs into a single mortgage. Perfect for fixer-uppers that wouldn’t pass standard FHA appraisal.
Construction-to-permanent loan
Finances land purchase and construction, then converts to a standard mortgage when the home is built. Requires extra equity and documentation.
Reverse mortgage
For homeowners 62+, a reverse mortgage converts home equity into cash without requiring monthly payments. The loan is repaid when the home is sold or the owner passes away. Complex product — read the fine print carefully.
Bank statement loan (non-QM)
For self-employed buyers who can’t document income the traditional way. The lender uses 12–24 months of bank statements to verify income. Higher rates, but often the only path for entrepreneurs.
HELOC and home equity loan
Not technically purchase mortgages, but worth mentioning: these let existing homeowners borrow against their equity. A HELOC is a revolving line of credit; a home equity loan is a fixed lump sum.
How to choose the right mortgage type
Ask yourself these four questions:
1. What’s your credit score?
Under 620 → FHA or VA. 620–679 → Conventional 97, HomeReady, FHA. 680–739 → Conventional standard. 740+ → Any loan, best rates.
2. How much can you put down?
0% → VA (if eligible) or USDA (if location). 3% → Conventional 97. 3.5% → FHA. 5%+ → Conventional. 20%+ → Any conventional, no PMI.
3. How long will you stay?
< 7 years → Consider an ARM. 7+ years → Fixed-rate is usually safer.
4. How much house are you buying?
Under the county conforming limit → Conventional, FHA, or VA. Over the limit → Jumbo loan with stronger credit requirements.
Mortgage type cheat sheet
| Loan type | Best for | Min down | Min credit |
|---|---|---|---|
| VA | Veterans / military | 0% | 580 |
| USDA | Rural buyers, low income | 0% | 640 |
| FHA | Lower credit, small down | 3.5% | 580 |
| Conventional 97 | First-time buyers | 3% | 620 |
| Conventional | Good credit, 5%+ down | 5% | 620 |
| Jumbo | Expensive homes, strong profile | 10–20% | 700+ |
Save on any loan type with Beycome
No matter which mortgage type you choose, the buyer agent commission (typically 3%) is built into the purchase price of every listed home. When you buy with the Beycome buyer program, we rebate up to 2% of the purchase price back to you at closing. That’s real cash you can apply toward down payment, closing costs, or just a bigger financial cushion.
Bottom line: match the loan to the life
The best mortgage isn’t the one with the lowest rate — it’s the one that fits your credit, your down payment, your timeline, and the home you actually want to buy. Run the numbers on multiple loan types before you commit, and never accept the first quote a lender throws at you.
Compare loan types against your real budget. Use the Beycome affordability calculator to see how conventional, FHA, and VA loans affect what you can afford — in seconds.
Discover beycome title today!