Buying a home is one of the biggest financial decisions most people will ever make — and choosing the right mortgage can save you thousands over the life of the loan. With so many mortgage loan types available, it’s important to understand the differences so you can pick the one that fits your financial situation and homeownership goals.

Below, we break down the most common mortgage options, their benefits, and who they work best for.

Conventional Loans

A conventional loan is a mortgage not backed by the government. These are offered by banks, credit unions, and mortgage lenders.

Key features:

• Down payments as low as 3% for qualified buyers.
• Fixed-rate or adjustable-rate terms available.
• Private mortgage insurance (PMI) required if under 20% down.

Best for: Borrowers with good credit, steady income, and some savings for a down payment.

FHA Loans

An FHA loan, insured by the Federal Housing Administration, helps buyers with limited savings or lower credit scores.

Key features:

• Down payment as low as 3.5%.
• Flexible credit requirements.
• Requires upfront and annual mortgage insurance premiums (MIP).

Best for: First-time buyers and those with imperfect credit.

VA Loans (for active or retired military)

A VA loan is guaranteed by the U.S. Department of Veterans Affairs for eligible service members, veterans, and certain surviving spouses.

Key features:

• No down payment required.
• No PMI.
• Competitive interest rates.

Best for: Military service members, veterans, and their families.

If you’re eligible, you can combine the benefits of a VA loan with our exclusive military home-buying and selling savings program, which offers commission rebates, lender credits, and discounted services. Learn more about our real estate rebates for veterans and military families.

USDA Loans (Loans for Rural Areas)

A USDA loan, backed by the U.S. Department of Agriculture, is for homes in eligible rural and suburban areas.

Key features:

• No down payment.
• Low mortgage insurance costs.
• Must meet income and location requirements.

Best for: Buyers in qualifying rural or small-town areas.

Jumbo Loans (Best for high-cost properties)

A jumbo loan is for amounts that exceed the conforming loan limits set by the FHFA.

Key features:

• Finances luxury or high-priced homes.
• Requires excellent credit and strong income.
• May have slightly higher interest rates.

Best for: Buyers in expensive real estate markets.

Adjustable-Rate Mortgages (ARMs)

An ARM starts with a fixed interest rate for a set period, then adjusts periodically.

Key features:

• Lower initial interest rate than fixed-rate loans.
• Payments may rise or fall after the fixed term ends.

Best for: Buyers planning to sell or refinance within a few years.

Fixed-Rate Mortgages

With a fixed-rate mortgage, your interest rate stays the same for the life of the loan.

Key features:

• Predictable monthly payments.
• Common terms: 15, 20, or 30 years.

Best for: Buyers who want payment stability and plan to stay long-term.