The 4 Main Mortgage Types for Every Buyer

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When it comes to mortgages, 1 size doesn't fresh all. This article delves into nan 4 main owe types, including conventional, FHA, VA, and Jumbo loans, helping you understand their features and erstwhile to take 1 complete nan others to make nan correct determination for your homebuying needs.

Discussions connected mortgages usually attraction connected nan loans arsenic a azygous type. But thing tin beryllium further from nan truth. Not only are location different types of owe loans, but location are besides different owe programs, not to mention mortgage lenders.

We’re going to talk some nan different types of owe loans and nan various programs that connection them. However, this is simply a wide chat of nan astir celebrated types, since location are much less-popular indebtedness types and moreover issuers.

The Different Types of Mortgage Programs

There are 4 superior owe programs available:


Generally speaking, accepted mortgages mention to loans that are funded by nan Federal National Mortgage Association (Fannie Mae) and nan Federal Home Loan Mortgage Corporation (Freddie Mac).

They’re typically originated by banks, credit unions, owe banks, owe companies, and different lenders, past sold to 1 of nan 2 awesome owe agencies.

These loans are besides typified by what’s known arsenic their conforming indebtedness limits. That is, location is simply a limit to nan magnitude that tin beryllium loaned nether a accepted program. That limit is generally $766,550 for 2024.

However, accepted loans tin beryllium higher for two- to four-family homes, and besides for properties located successful areas designated arsenic precocious cost.

(These are nan higher costs lodging markets usually located connected nan East and West Coast, including New York City, Boston, Washington DC, San Francisco, and Los Angeles.)

Conventional mortgages are besides distinguished from FHA and VA loans by nan owe security requirement.

Commonly referred to as backstage owe insurance, aliases PMI, it is simply a type of insurance coverage that pays nan owe lender portion of nan indebtedness equilibrium if you default connected nan loan.

Some of nan Major Features of Conventional Mortgages Include nan Following:

  • The minimum down costs is 5%, but they do connection loans pinch arsenic small arsenic 3% down for first-time homebuyers arsenic good arsenic low- and moderate-income households.
  • Unlike FHA and VA mortgages, PMI is only paid connected a monthly ground arsenic portion of your indebtedness payment. There is nary required upfront owe security cost.
  • The minimum in installments people for accepted loans is 620, but you’ll get a amended liking complaint nan higher your credit score is.
  • Conventional loans tin beryllium utilized for nan purchase of 2nd homes and finance properties successful summation to superior residences.
  • Loans are disposable successful some fixed-rate and ARMs.


FHA loans activity overmuch nan aforesaid measurement arsenic accepted loans, but nan parameters are much basic. For example, nan minimum down costs request is 3.50%, moreover for first-time homebuyers.

But nan 2 main features of FHA loans, nan ones that astir differentiate them from accepted mortgages, are:

Mortgage Insurance:

PMI connected FHA loans is commonly referred to arsenic owe security premium, aliases simply MIP. The connection backstage doesn’t apply, because nan owe security is provided by nan US authorities done nan Federal Housing Administration.

Mortgage security is collected successful 2 ways. Much for illustration accepted loans, location is simply a monthly premium added to your location payment.

But there’s besides an upfront owe security premium (UFMIP) that’s added to your indebtedness balance, though it tin beryllium paid retired of pouch astatine nan clip of indebtedness closing.

Credit Considerations:

There’s astir apt nary bigger logic for nan fame of FHA mortgages than nan truth that they are much relaxed pinch in installments standards.

For example, while accepted loans require a minimum in installments people of 620, FHA loans will judge a people arsenic debased arsenic 580. But they’ll spell arsenic debased arsenic 500 pinch a down costs of astatine slightest 10%. This is decidedly a indebtedness programme to see if you person adjacent aliases mediocre credit.

Other Features of Fha Loans to Be Aware of Include:

  • Though nan minimum down costs is 3.5%, FHA loans are commonly utilized successful conjunction pinch down costs assistance programs that alteration buyers to purchase homes pinch nary down payment.
  • While FHA is much accommodating to lower in installments scores, nan programme should not beryllium viewed arsenic a subprime mortgage. You won’t beryllium capable to get a indebtedness if you’re six months retired of bankruptcy, aliases if you person a caller shape of important precocious payments.
  • FHA loans are disposable for owner-occupied, superior residences only. They cannot beryllium utilized to finance finance properties aliases 2nd homes.
  • Loans are disposable successful some fixed-rate and ARMs.

VA Loans

VA loans person overmuch much successful communal pinch FHA loans than they do pinch accepted loans. That’s because, overmuch for illustration FHA loans, VA loans person owe security provided by a authorities agency (the Veterans Administration).

Mortgage security is charged arsenic a one-time, upfront fee, pinch nary monthly premium added to your location payment.

The loans are provided by participating lenders, which tin see banks, in installments unions, and different owe lenders. They are disposable only to eligible veterans and existent members of nan US military.

However, nan large advantage of VA loans is that they supply 100% financing. That intends an eligible seasoned tin acquisition a location pinch nary money down. And while nan owe security premium is charged upfront, it’s added to nan indebtedness amount, truthful location is nary upfront cost.

The 100% indebtedness proviso applies to nan conforming indebtedness limit. But VA loans are besides disposable for higher-priced properties if request be. However, nan borrower will person to nutrient a down costs adjacent to 25% of nan magnitude that nan indebtedness exceeds nan conforming indebtedness limit.

For example, if nan indebtedness exceeds nan limit by $100,000, nan borrower will beryllium entitled to 100% financing connected up to $548,250 but must beforehand $25,000—25%—for nan excess amount.

Basic Features of VA Loans Include nan Following:

  • The loans are disposable only to eligible existent and erstwhile members of nan US subject and their families.
  • Though location is an upfront owe security premium for nan loans, location is nary monthly premium costs required.
  • Loans are disposable for financing only for owner-occupied superior residences. Much for illustration FHA loans, they’re not disposable for finance properties aliases 2nd homes.
  • The VA has nary established minimum in installments score, but borrowers are expected to show responsible in installments management.

Jumbo Loans

As nan sanction implies, Jumbo loans are larger loans that transcend conforming indebtedness limits. As such, they’re typically utilized to acquisition aliases refinance higher-priced properties. Loan amounts tin beryllium arsenic precocious arsenic respective cardinal dollars.

Jumbo loans person much successful communal pinch accepted loans than they do pinch FHA and VA loans. But dissimilar accepted loans, which are funded by Fannie Mae and Freddie Mac, Jumbo loans are provided by independent lenders, for illustration banks.

Because they are, lending guidelines are little standardized than they are pinch different indebtedness programs. In general, they person stricter indebtedness requirements.

Basic Features of Jumbo Loans Include nan Following:

  • Loan amounts tin scope from conscionable supra nan conforming indebtedness limit to arsenic overmuch arsenic respective cardinal dollars.
  • Loans whitethorn beryllium disposable for 2nd homes and finance properties, but a lender whitethorn besides restrict them only to owner-occupied superior residences.
  • They mostly request good aliases fantabulous credit to qualify. Minimum in installments scores tin beryllium anyplace from 650 to much than 700.
  • The emblematic down costs request is astatine slightest 20%. And you tin expect that percent to summation connected higher indebtedness amounts.
  • Because they are larger indebtedness amounts, liking rates charged connected Jumbo mortgages are typically higher than what they are connected different indebtedness types.

Fixed-Rate vs Adjustable Rate Mortgages (ARMs)

Fixed-rate and ARMs are nan 2 superior types of owe loans offered nether nan 4 main owe programs (conventional, FHA, VA, and Jumbo). While they’re some offered by FHA and VA, astir borrowers choosing 1 of these indebtedness programs opt for a fixed-rate loan.

However, nan aforesaid is not existent pinch some accepted and Jumbo loans. ARM loans are somewhat much celebrated pinch each of these indebtedness types. This is particularly existent of Jumbo loans, which cater to higher-income borrowers who are often willing successful getting nan lowest liking complaint possible.

Overall, however, ARM loans thin to beryllium reasonably uncommon these days. According to accusation released by Bankrate successful 2023, ARMs comprise little than 18.6% of mortgages made successful 2023. This is owed to nan caller arena successful which ARM loans are only somewhat little than fixed rates.

In addition, pinch fixed rates astatine grounds lows, it makes consciousness for astir borrowers to fastener successful those rates alternatively than taking a chance connected still little rates pinch ARMs.

A fixed-rate indebtedness is precisely what nan sanction implies. Both nan liking complaint and nan monthly costs are fixed for nan life of nan loan. Loan position scope betwixt 10 and 30 years.

At nan extremity of nan indebtedness term, nan main of nan indebtedness will beryllium afloat repaid. That will beryllium existent successful nan lawsuit of some a fixed-rate indebtedness and an ARM.


ARMs connection a fixed liking complaint for a circumstantial magnitude of time. Typical first position are 3 years, 5 years, 7 years, and 10 years. After nan first fixed-rate period, nan indebtedness will go a one-year adjustable, pinch nan complaint changing astir each year.

Interest rates connected ARMs are based connected a communal index, specified arsenic nan one-year US Treasury bill, aliases nan six-month LIBOR. The lender will past adhd a separator (percentage points) to nan scale to nutrient nan liking complaint that early complaint changes will beryllium based on.

For example, if nan output connected one-year US Treasury bills is 1.00% astatine nan clip of adjustment, and nan separator is 1.50%, your liking complaint will reset astatine 2.5%. That complaint will beryllium bully for 1 twelvemonth and will beryllium readjusted utilizing nan aforesaid look arsenic nan day of nan adjacent adjustment.

ARM Interest Rate Cap Limits

Fortunately, ARMs person complaint caps that limit really precocious nan complaint tin spell connected immoderate azygous adjustment, aliases moreover complete nan life of nan loan.

A communal headdress building is 5/2/5. Each number represents nan maximum percent by which nan afloat indexed complaint (index positive margin) tin set astatine nan clip of adjustment.

The first number intends nan complaint cannot summation by much than 5% supra your original liking complaint for nan first complaint change. If your original complaint is 2.50%, nan astir nan lender tin summation it to is 7.50%.

The 2nd number (2, aliases 2%), is nan astir nan complaint tin alteration connected consequent adjustments. If your first complaint is 2.50%, and it increases to 3.50% astatine nan first accommodation but past jumps to 7.5% connected nan 2nd adjustment, nan highest complaint you’ll salary is 5.50%. That’s nan 3.50% rate, positive 2%.

The 3rd number successful nan series represents nan astir nan liking complaint tin summation complete nan life of nan loan. In nan illustration above, that’s 5%. That intends if your first complaint is 2.50%, nan highest complaint you tin beryllium charged complete nan life of nan indebtedness is 7.50%, sloppy of really high-interest rates go.

If you’re willing successful taking an ARM, beryllium judge to familiarize yourself pinch nan liking complaint caps associated pinch nan loan. The lender must disclose this to you astatine nan clip of application, but it will besides beryllium included successful nan closing documents.

Make it a constituent to petition nan documents that specifically bespeak nan headdress statement connected your ARM earlier signing immoderate paperwork. Once nan indebtedness closes, nan headdress building cannot beryllium changed.

When Should You Use a Fixed-Rate Mortgage Over Other Types?

Fixed-rate loans are typically nan amended prime erstwhile you scheme to enactment successful nan home for galore years. If you expect nan existent location to beryllium your “forever home,” aliases you expect to beryllium location for astatine slightest 10 years, a fixed-rate owe is usually nan champion option.

It will supply complaint and costs protection sloppy of what’s happening pinch liking rates. And should rates driblet aft you return your loan, you tin ever refinance to get nan use of a little rate.

A fixed-rate owe is besides powerfully advised if you want to minimize homeownership risk. An inherent disadvantage of ARMs is that rates tin rise, possibly capable to frighten your expertise to stay successful nan home. If this is simply a interest you have, take a fixed-rate mortgage.

Along nan aforesaid line, fixed-rate mortgages are mostly a amended prime for first-time homebuyers. They supply greater predictability and destruct a imaginable liking complaint daze that comes pinch ARMs.

However, fixed that liking rates are presently astatine historical lows, it makes abundant consciousness to fastener successful a fixed complaint now. Though it’s ever imaginable liking rates will spell moreover little successful nan future, it’s hardly guaranteed.

And whenever thing is astatine a historical low, nan likelihood of further declines is overmuch little apt to happen.

When Should You Use an ARM?

An ARM is champion utilized erstwhile you expect to enactment successful your location for nary longer than nan fixed-rate word of nan loan. For example, if you expect to unrecorded successful a location for nan adjacent 5 years, you whitethorn beryllium comfortable pinch a 5-year ARM. It’s apt you’ll move retired of nan location earlier nan first liking complaint accommodation hits.

Of course, nan azygous biggest logic for taking an ARM astatine each is because of an interest-rate advantage. For example, if an ARM carried an liking complaint a afloat 2 percent points beneath that of a fixed-rate loan, nan savings successful nan first years mightiness warrant nan consequence of complaint adjustment.

Unfortunately, nan complaint dispersed betwixt ARMs and fixed-rate mortgages is obscurity adjacent that high. That mostly explains why ARMs now correspond a very mini percent of each mortgages taken.

Where to Get nan Right Mortgage Type

There are plentifulness of institutions wherever you tin get a mortgage, whether conventional, FHA, VA, aliases Jumbo. But if you don’t person a favourite slope aliases in installments union, nan large nationalist owe lenders are an fantabulous choice.

Rocket Mortgage is nan online look of Quicken Loans, nan largest unit owe lender successful nan country. They supply each types of owe loans, but they run wholly online, streamlining and speeding up nan exertion process.

loanDepot is besides a nationwide lender, offering conventional, Jumbo, FHA, and VA loans. Similar to Rocket Mortgage, they connection an all-online exertion to velocity up nan indebtedness exertion process.

Veterans United is nan go-to prime for veterans and active-duty subject unit looking for VA mortgages.

As nan largest VA owe lender successful nan country, they specialize successful nan indebtedness type and moreover connection a web of VA-friendly existent property agents to thief you find a location and navigate nan closing process.

Credible is an online owe marketplace that provides an opportunity to get complaint quotes from respective lenders.

In a matter of minutes, you’ll complete a little online exertion and person aggregate quotes to take from. That will destruct nan request to get quotes from individual lenders 1 astatine a time.

The Bottom Line connected nan 4 Main Mortgage Types for Every Buyer

Selecting nan correct owe involves knowing nan pros and cons of different types. Conventional loans, funded by Fannie Mae and Freddie Mac, connection various position and down costs options but require backstage owe security (PMI).

FHA loans, backed by nan Federal Housing Administration, cater to little in installments scores, person little down payments, and see owe security premium (MIP). 

VA loans, designed for veterans, connection 100% financing, nary monthly owe insurance, and elastic in installments standards. Jumbo loans suit high-value properties but request fantabulous in installments and larger down payments.

Fixed-rate mortgages guarantee stability, while Adjustable Rate Mortgages (ARMs) connection first debased rates pinch imaginable early adjustments.