Walk into any mortgage conversation and you'll quickly discover there's no single "mortgage"—there's a menu of loan types, each designed for different borrowers and situations. Choosing the right one can mean the difference between a payment you can comfortably afford and one that stretches you too thin, or between getting approved and being turned down.
The mortgage landscape can be divided into two broad categories: government-backed loans (FHA, VA, USDA) that come with federal insurance or guarantees, and conventional loans that don't. Government programs typically offer easier qualification or special benefits for specific groups, while conventional loans often provide the best terms for borrowers with strong credit and substantial down payments.
Conventional Loans: The Standard Choice
Conventional mortgages aren't backed by any government agency—instead, they're guaranteed by private entities like Fannie Mae and Freddie Mac. This makes them the most common type of mortgage, accounting for roughly two-thirds of all home loans. They're also the most flexible, available for primary residences, second homes, and investment properties.
To qualify for a conventional loan, you'll typically need a credit score of at least 620, though you'll pay more in fees and interest at that level. Borrowers with scores above 740 get the best rates. Your debt-to-income ratio should generally stay below 43%, though some lenders accept higher ratios with compensating factors like excellent credit or substantial reserves.
The down payment question is where conventional loans get interesting. While 20% down is traditional—and lets you avoid private mortgage insurance (PMI)—you can put down as little as 3% with conventional loans. The trade-off is that PMI adds $50 to $200+ monthly until you reach 20% equity. Unlike FHA mortgage insurance, conventional PMI can be canceled once you hit that threshold.
Conventional loans work best for borrowers with good credit, those who can put 20% down, and anyone buying investment property (which most government programs don't allow).
FHA Loans: Easier Entry for First-Time Buyers
FHA loans are backed by the Federal Housing Administration and designed to help borrowers who might not qualify for conventional financing. They're particularly popular with first-time buyers because of their lenient credit requirements and low down payment options.
The headline benefit: you can get an FHA loan with a credit score as low as 580 with just 3.5% down. Scores between 500 and 579 require 10% down. Compare that to conventional loans, where scores below 620 typically mean rejection. FHA also tends to be more forgiving of past credit problems like bankruptcies or foreclosures, as long as you've reestablished good credit habits.
The catch is mortgage insurance premium (MIP). FHA loans require both an upfront premium (1.75% of the loan, usually rolled into the mortgage) and annual premiums (0.55% for most borrowers). Unlike conventional PMI, FHA MIP doesn't go away—if you put less than 10% down, you'll pay it for the life of the loan. This makes FHA loans more expensive over time for borrowers who could qualify conventional.
FHA works best for buyers with credit scores below 700, those recovering from credit problems, or anyone who needs the lowest possible down payment and can't qualify for conventional 3% programs.
VA Loans: Unmatched Benefits for Veterans
VA loans are available to veterans, active-duty military, National Guard members, Reservists, and eligible surviving spouses. If you qualify, the VA loan is often the best mortgage product available—period.
The benefits are remarkable: no down payment required, no mortgage insurance, competitive interest rates (typically lower than conventional), and limits on closing costs. For eligible borrowers, there's rarely a reason to choose anything else. The VA doesn't set a minimum credit score, though most lenders want at least 620.
VA loans do come with a funding fee—a one-time charge that ranges from 1.25% to 3.3% of the loan amount depending on your down payment and whether you've used the benefit before. The fee can be rolled into the loan. Some veterans with service-connected disabilities are exempt from the funding fee entirely.
To use a VA loan, you'll need a Certificate of Eligibility (COE) proving your military service meets the requirements. Your lender can usually help you obtain this.
USDA Loans: Zero Down in Rural Areas
USDA loans offer 100% financing—no down payment at all—for buyers purchasing in eligible rural and suburban areas. Despite the "rural" label, many areas surprisingly close to cities qualify. The USDA's eligibility map covers about 97% of U.S. land area.
USDA loans come with income limits (your household income must be at or below 115% of the area median), but these limits are higher than many expect. A family of four in many areas can earn over $100,000 and still qualify. The program requires the home to be your primary residence—no second homes or investment properties.
Like FHA, USDA loans require mortgage insurance—a 1% upfront fee and 0.35% annual fee. But the annual fee is lower than FHA, making USDA loans less expensive over time for those who qualify.
Jumbo Loans: When You Need More
Conforming loan limits set a ceiling on how much you can borrow through conventional loans backed by Fannie Mae and Freddie Mac. In 2026, that limit is $832,750 in most of the country, though it rises to $1,249,125 in high-cost areas like San Francisco and New York City. Need to borrow more? You'll need a jumbo loan.
Because jumbo loans can't be sold to Fannie or Freddie, lenders take on more risk—and they want stronger borrowers to compensate. Expect requirements of a credit score above 700 (often 720+), a down payment of 10-20% or more, significant cash reserves, and a debt-to-income ratio below 43%. Jumbo loans also typically come with slightly higher interest rates than conforming loans.
Use our mortgage calculator to estimate payments for different loan amounts, and check current mortgage rates to see how your situation might affect pricing.
Veterans: VA loan is almost always the best choice.
Rural buyers with moderate income: USDA offers unbeatable zero-down terms.
Credit below 680: FHA is often your best (or only) option.
Credit above 700 with 10%+ down: Conventional likely offers better long-term value.
Buying investment property: Conventional is your only option.