What Are the Different Types of Mortgage Loans?

Most U.S. home buyers choose among four loan types: conventional loans and three government-backed loans from FHA, VA, and USDA. Conventional loans include conforming loans that meet Fannie Mae or Freddie Mac rules, jumbo loans above the conforming limit, and other nonconforming loans that fail those rules for reasons other than size. Most offer fixed or adjustable rates, but USDA guaranteed loans require a fixed rate. Your credit score, down payment, military service, where the home is, and the loan amount decide which types you qualify for.

For how any mortgage works, from the note to amortization and escrow, start with what a mortgage is and how it works.

How do the main loan types compare?

Minimums below are the program rules. Lenders can set stricter requirements of their own, so ask each lender for its minimum score.

Government-insured versus conventional loans compares these costs over time with a worked example.

What are conventional loans?

A conventional loan is any mortgage not insured or guaranteed by a federal agency. Most are conforming loans, sized and underwritten so Fannie Mae or Freddie Mac can buy them from the lender.

• Loan limit. For 2026, the conforming limit for a one-unit home is $832,750 in most counties and up to $1,249,125 in high-cost counties. Alaska, Hawaii, Guam, and the U.S. Virgin Islands have higher limits.
• Down payment. Fannie Mae allows 3% down on a fixed-rate loan for a one-unit home you will live in when at least one buyer is a first-time buyer, with homeownership education. Freddie Mac's standard maximum is 95% of the value for a one-unit home you will live in (5% down), 90% for a second home, and 85% for an investment property.
• Mortgage insurance. With less than 20% down, you pay private mortgage insurance (PMI). You can ask to cancel it when your balance reaches 80% of the home's original value. The servicer generally must end it on the date your balance is scheduled to reach 78% of that value if you are current.

Conventional loans are the only main type that finances second homes and investment properties.

A jumbo loan is a conventional loan above your county's conforming limit. Because Fannie Mae and Freddie Mac cannot buy it, each lender sets its own credit, down payment, and cash reserve rules. Jumbo rates are not always higher: for the week ending October 16, 2026, the Mortgage Bankers Association (MBA) reported an average of 7.33% on 30-year fixed jumbo loans and 7.41% on conforming loans. See what a jumbo loan is.

What are FHA, VA, and USDA loans?

These loans come from private lenders, but a federal agency covers part or all of the lender's loss if you default. That backing is why they allow lower down payments or credit scores. All three require that you live in the home.

• FHA loans are insured by the Federal Housing Administration. A score of 580 or higher allows 3.5% down; 500 to 579 requires 10%. You pay an upfront premium of 1.75% of the loan and an annual premium, 0.55% on a typical 30-year loan with less than 5% down. With less than 10% down, the annual premium lasts for the life of the loan unless you refinance.
• VA loans are guaranteed by the Department of Veterans Affairs for eligible veterans, service members, and some surviving spouses. VA does not require a down payment or monthly mortgage insurance. Instead you pay a one-time funding fee, 2.15% of the loan on first use with less than 5% down, unless you are exempt, for example because you receive VA disability compensation.
• USDA loans are guaranteed by USDA Rural Development for homes in areas it designates as rural. Your household income must be at or below USDA's moderate-income limit for the area. The lender must also find that you cannot meet all parts of USDA's test for conventional credit: available non-retirement funds for 20% down plus closing costs, monthly housing payments (including taxes and insurance) within 28% of gross income and total debt payments within 36%, and qualifying credit for a 30-year fixed loan without PMI. Qualifying for a low-down-payment conventional loan alone does not disqualify you. There is no down payment requirement. For fiscal year 2027, which began October 1, 2026, the fees are 1% upfront and 0.35% a year.

Should you choose a fixed or adjustable rate?

Every loan type above comes in fixed-rate versions, and most come in adjustable-rate versions.

• Fixed-rate mortgage. The rate never changes, so principal and interest stay the same for the full term. The MBA's averages for the week ending October 16, 2026 were 7.41% for a 30-year fixed conforming loan and 6.73% for a 15-year fixed loan.
• Adjustable-rate mortgage (ARM). The rate is fixed for an initial period, then resets on a schedule using a market interest rate (the index) plus a fixed number of percentage points set by the lender (the margin). Caps limit how much the rate can rise at each adjustment and over the loan's life. A 5/1 ARM is fixed for 5 years, then adjusts once a year. The same MBA survey put the 5/1 ARM average at 6.46%, almost a full point below the 30-year fixed rate.

An ARM can cost less if you sell or refinance before the first reset, but your payment can rise after it. Fixed-rate versus adjustable-rate mortgages shows how long you need to keep the loan for each to come out ahead.

What other mortgage types exist?

A small share of loans have features that federal rules keep out of a Qualified Mortgage (QM), the category of loans with safer features that lenders are presumed to have verified you can repay:

• Interest-only loans let you pay only interest for a set period, so the balance does not fall. Payments jump when principal payments start.
• Balloon loans have low payments for a few years and then require the remaining balance in one large payment. Small lenders can make some balloon loans that still count as QMs.
• Non-QM loans fall outside the QM rules, for example because of an interest-only period, a term over 30 years, or points and fees above the QM cap. Lenders still have to make a good-faith effort to confirm you can repay.

With any of these, ask the lender for the full payment schedule in writing, including the largest payment you could owe, before you apply.

Which type of loan should you get?

Start with the situations that rule types in or out:

• You are a veteran, service member, or surviving spouse. Check VA eligibility first. A VA loan is the only main type with both no down payment and no monthly mortgage insurance.
• You are buying in a rural or small-town area on a moderate income. Check the address and your household income against USDA's limits. If both qualify, a USDA loan needs no down payment.
• Your credit score is below about 620. FHA accepts scores down to 500 and charges the same premium at every score, while PMI on a conventional loan costs more as your score falls.
• You have a small down payment and a strong score. Compare a 3% or 5% down conventional loan with FHA. PMI can be canceled; FHA's annual premium usually cannot.
• The home is expensive. Look up your county's 2026 conforming limit. If the loan is above it, compare a jumbo loan with a conforming loan plus a larger down payment.
• You are buying a second home or rental. Only conventional loans cover these; FHA, VA, and USDA require you to live in the home.

Then ask at least two lenders for Loan Estimates on each type you qualify for, and compare the rate, the mortgage insurance or fee, and the cash to close.