Types of Mortgages: The Complete Comparison

There is no single best mortgage — only the best mortgage for your situation. Your credit score, down payment, military service, income and location each point to a different loan, and choosing the wrong one can cost you tens of thousands of dollars over the life of the loan. This guide lays out every major mortgage type side by side: who each one is for, what it costs, and the tradeoffs you need to understand before you sign.

Conventional loans

Conventional loans are the workhorse of the American mortgage market — plain loans with no government backing or insurance, issued by banks, credit unions and independent lenders. Because they are not government-insured, they carry stricter requirements, but for borrowers who qualify they are often the cheapest option.

The minimum down payment is 3% for first-time buyers, but anything below 20% triggers private mortgage insurance, or PMI, which we covered in our down payment guide. The best rates go to borrowers with 760+ credit scores and strong debt-to-income ratios. Within the conventional category, there is an important split: conforming loans stay under the loan limits set by Fannie Mae and Freddie Mac, while jumbo loans exceed them. Conforming loans are the sweet spot — standardized, widely available and competitively priced.

FHA loans

FHA loans are insured by the Federal Housing Administration and were built specifically for first-time and lower-credit buyers who might not qualify for a conventional loan. The requirements are more forgiving: a down payment of just 3.5% with a credit score of 580 or higher, and 10% down for scores between 500 and 579.

The tradeoff is the mortgage insurance premium, or MIP. Unlike PMI on a conventional loan, which can be removed once you reach 20% equity, FHA's MIP lasts for the life of the loan on most loans with less than 10% down. You pay an upfront premium plus a monthly amount, and the only way to remove it is to refinance into a conventional loan later. FHA is a great on-ramp for buyers who need it, but the long-term insurance cost is real, so many borrowers refinance out of it once their credit and equity improve.

VA loans

VA loans are guaranteed by the Department of Veterans Affairs and are available to veterans, active-duty service members, reservists, National Guard members and eligible surviving spouses. If you qualify, this is usually the best deal in the entire mortgage market.

The benefits are hard to beat: zero down payment, no monthly mortgage insurance, and interest rates that are often lower than conventional loans. The one cost is a one-time VA funding fee, which varies based on your down payment and service history and is waived entirely for some disabled veterans. The main requirement is a certificate of eligibility, which confirms your service. For anyone with military service, checking VA eligibility before looking at any other loan is almost always the right first move.

USDA loans

USDA loans are backed by the Department of Agriculture and are designed to help buyers in rural and some suburban areas. Like VA loans, they require zero down payment and carry low mortgage insurance costs, making them one of the most affordable paths to homeownership for those who qualify.

The catch is eligibility, which is two-part. First, the property must be in a designated rural area — a broader definition than most people assume, covering many small towns and outer suburbs. Second, your household income must fall under a local limit. If you are buying outside a major metro and your income qualifies, a USDA loan is worth checking before you assume you need a down payment you have not saved.

Jumbo loans

Jumbo loans are for homes that exceed the conforming loan limit, which in 2026 is over $1.1 million in most areas. Because these loans are too large for Fannie Mae and Freddie Mac to buy, they are held by the lender or sold to private investors, which makes them riskier — and that risk is priced in.

Expect slightly higher rates and stricter requirements: often 10% to 20% down, excellent credit, substantial cash reserves and stronger documentation. Jumbo loans are for high-price markets like coastal California, New York and Hawaii, where even a modest home crosses the conforming threshold. If you are buying in one of those markets, compare jumbo terms carefully — the differences between lenders are larger than in the conforming space.

Adjustable-rate mortgages (ARMs)

An adjustable-rate mortgage starts with a lower rate than a fixed loan, holds it fixed for an initial period — commonly 5, 7 or 10 years — and then adjusts annually based on a market index plus a margin, within caps that limit how much it can rise.

ARMs make sense for a specific kind of buyer: someone who will sell or refinance before the fixed period ends, or who expects their income to rise substantially. If you are buying a starter home you plan to sell in five years, a 5/1 ARM's lower initial rate can save thousands. The risk is the flip side — if you stay past the adjustment and rates have risen, your payment can jump by the full cap amount. ARMs are a tool for a defined timeline, not a way to afford a payment you could not otherwise handle.

How to choose

The decision tree is straightforward. If you have military service, start with VA. If you are buying in a qualifying rural area with a modest income, check USDA. If you have strong credit and a decent down payment, a conventional loan is usually cheapest. If your credit is below about 620, FHA is your main route, with a plan to refinance later. If you are buying a home above the conforming limit, you are in jumbo territory. And if you will be in the home less than five to seven years, consider an ARM.

Frequently asked questions

What is the best mortgage for a first-time buyer?

Most first-time buyers use a conventional loan with 3% down or an FHA loan with 3.5% down, depending on credit. VA and USDA are better if you qualify.

What credit score do I need for a conventional loan?

You can qualify with a score in the low 600s, but 760 or higher gets the best rates. Below 620, FHA is usually the better route.

Can I refinance out of an FHA loan?

Yes. Many borrowers refinance into a conventional loan once they reach 20% equity and have stronger credit, which removes FHA's lifetime MIP.

Is a jumbo loan worth it?

If you are buying in a high-price market above the conforming limit, it is your option. Shop multiple lenders, because jumbo terms vary more than conforming ones.

See each loan on your payment

The best way to decide is to see the numbers. Our mortgage calculator lets you compare how different loan types, down payments and rates change your monthly payment and total interest. Run your own numbers, then talk to a lender with a clear picture of which loan fits.