Types of Home Loans: Which One Fits Me?
Answer four quick questions to see which loan types may be worth a closer look. This is a starting point, not an approval.
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Lenders add their own requirements, and loan rules change. A lender can tell you what you actually qualify for, and you can ask for a side-by-side comparison of more than one loan type.
| Conventional | FHA | VA | USDA | |
|---|---|---|---|---|
| Who it is for | Most buyers, especially with good credit | Buyers with smaller down payments or lower credit scores | Eligible veterans, service members, and some spouses | Moderate-income buyers in eligible rural and some suburban areas |
| Down payment | As little as 3% with some programs | 3.5%, or 10% with a lower credit score | Often none | Often none |
| Mortgage insurance | Monthly insurance if you put down under 20%, which can be removed later | Upfront and monthly premiums, often for the life of the loan with under 10% down | No monthly insurance, but most loans have a one-time funding fee | An upfront fee and an annual fee |
| Credit | Higher scores get better rates | More flexible | Set by each lender | Lenders often want a mid-600s score or higher |
| Good to know | Loans above your area's limit are called jumbo loans and usually have stricter rules | Has limits on the loan size that vary by area | Eligibility must be confirmed with a certificate | Your household income must be under a limit for your area |
How to choose a home loan type
Most home loans in the United States fall into four main types: conventional, FHA, VA, and USDA. Conventional loans are not backed by the government. FHA, VA, and USDA loans are backed by a government agency, which lets lenders offer easier terms to the buyers each program is designed for.
The right choice usually comes down to a few things: whether you qualify for a program like VA or USDA, how much you can put down, and your credit. A larger down payment and stronger credit tend to make conventional loans cheaper, while a smaller down payment or lower credit score often makes FHA a better fit. Eligible veterans and service members should always look at VA, and buyers in eligible rural areas should look at USDA.
This guide gives a rough starting point. Lenders set their own minimum credit scores and add other requirements, and program rules change over time. Ask a lender to compare more than one loan type for your situation, since the monthly payment and total cost can differ even when you qualify for several.
Common questions about types of home loans
What are the main types of home loans?
Most home loans in the United States are conventional, FHA, VA, or USDA loans. Conventional loans are not backed by the government. FHA, VA, and USDA loans are backed by a government agency, which lets lenders offer easier terms to the buyers each program is designed for.
Which home loan is best with a low down payment?
FHA loans allow as little as 3.5% down, some conventional programs allow as little as 3%, and VA and USDA loans often require no down payment for buyers who qualify. The best fit also depends on your credit and the total cost.
Does FHA mortgage insurance ever go away?
With less than 10% down, FHA mortgage insurance often lasts for the life of the loan, so many borrowers later refinance into a conventional loan once they have enough equity. Conventional mortgage insurance, by comparison, can be removed later.
What credit score do I need for each type of loan?
Higher scores get better rates on conventional loans, FHA is more flexible, USDA lenders often want a mid-600s score or higher, and VA lenders set their own minimums. Lenders add their own requirements, so ask about yours.
What is a jumbo loan?
A jumbo loan is a loan above the loan limit for your area. Jumbo loans usually have stricter rules than loans within the limit.