What Are the Different Types of Mortgages?

There are many different types of mortgage loans, each best suited to different financial needs.

People usually choose their mortgage based on what they qualify for (of which credit score and debt levels have the biggest impact), what keeps their monthly payments manageable, and what can help them buy a home with the least amount of financial strain. Let’s learn about types of mortgage loans and how they compare to each other to empower you to choose the best type for you.

Before discussing the details of each mortgage loan type, you should also understand how the structure of your mortgage loan affects your potential monthly payments. Choosing between fixed-rate, adjustable-rate, conforming, and non-conforming options can significantly impact your monthly payments and can have varying long-term costs.

The length of your loan (15- and 30-year loans are the most common) also has a direct impact on your monthly payments.

You can use our mortgage calculator to see how these factors affect your monthly payments.

Once you've considered the above factors, you must weigh the types of mortgages against each other to decide which one will work best for you; compare conventional, FHA, USDA, and VA loans.

Conventional Home Loans

Conventional loans are the most common mortgage type on the market, accounting for over 70% of mortgages in 2025. They have stricter criteria than government-backed loans since the lender bears the full risk of offering the loan, so those increased requirements offset lenders’ risk of the loan not being repaid.

In most states, the 2026 conventional loan limit is $832,750, with higher limits in more expensive areas. These loans are a good option if you have good credit, relative financial stability, and enough savings to make a significant down payment. However, lower-income borrowers or first-time homebuyers may still qualify for conventional loans through special programs.

Most conventional mortgage lenders require a down payment of 5% or higher; however, some types of conventional loans have more relaxed qualification standards but additional income eligibility requirements.

Some examples include Freddie Mac’s Home Possible® Program and Fannie Mae’s HomeReady® Program. These help first-time homebuyers and lower-income buyers qualify with as little as 3% down. They offer flexible funding, making them a good fit for individuals who meet the income and credit requirements but want the benefits associated with a conventional loan.

In most cases for conventional loans, unless you put at least 20% down, you'll likely pay mortgage insurance, an extra fee to offset the lender's risk since you have low equity in the home. Higher standards for your overall debt-to-income ratio, which is the amount of your monthly income that goes toward paying off debt, are common.

Government-Backed Home Loans

If you think a conventional loan is not a good fit, you can consider several federally backed loans. Different government entities guarantee these loans, but approved mortgage lenders sell them.

Guaranteed loans mean the government promises to repay a portion of the loan if the borrower defaults, reducing the lender's risk.

Each of these mortgage types has unique requirements, but they share a similar benefit: because lenders don’t bear all the risk, they often offer more flexible qualifications for borrowers of these loans.

Let's look at each loan type and its criteria.

FHA Loans

FHA loans are available to homebuyers with a credit score of at least 580, as long as they make the minimum 3.5% down payment. Depending on lender requirements, some lenders go as low as 500, but that usually requires a down payment of 10% or more. In addition, you need a steady, verifiable employment history.

You must also have a debt-to-income ratio lower than 43%, no foreclosures in the last three years, and use the loan to finance your primary residence.

First Residential typically looks for credit scores of 620 and above.

USDA Loans

USDA loans are more difficult to qualify for than FHA loans. The main differentiating factor is that the home must be in a qualified suburban or rural area. USDA loans also have income limits. The 2026 USDA loan income limit for households with 1-4 members is $119,850, and households with 5-8 have an income limit of $158,250. Rather than a fixed loan limit, the maximum loan is based on income, debt-to-income ratio, and property eligibility.

One of the USDA loans’ most attractive features is that no down payment is required since the federal government insures them, making lenders more willing to finance the purchase. This is also why USDA loans have flexible credit requirements; lenders are less concerned about borrowers repaying the loan if the government insures the mortgage. Borrowers must use the property as their primary residence, and USDA fees apply. However, there are lower interest rates and no prepayment penalties.

VA Loans

VA loans are only available to military service members, Veterans, and surviving spouses.

Most active-duty service members are eligible for a VA loan if they meet at least one of the following criteria:

• They have served 90 consecutive days of active duty during wartime.
• They have served 181 days of active duty during peacetime.
• They have completed six years of service in the National Guard or Reserves.

VA loans don't require a down payment and have relaxed credit requirements, since it can be challenging to save up and build credit while deployed. Typically, they have lower interest rates than most other loans. There's no mortgage insurance on VA loans, but often, a VA funding fee applies.

VA loans require the property to be the borrower’s primary residence, with occupancy typically required within 60 days of closing (extensions of up to one year are possible). These occupancy expectations are broadly aligned with most other mortgage programs. However, borrowers can use it to purchase a multi-unit property (four units maximum) as long as the borrower occupies one unit. VA loans don’t come with prepayment penalties, and the loans are assumable if you decide to sell later on.

Jumbo Loans

Jumbo loans exceed the limit for conforming loans in your area. Any of the previously mentioned loans can become a jumbo loan depending on their value. In most parts of the country, that limit is $832,750 for a single-family property.

In pricier areas such as most of California, New York City, the District of Columbia, Alaska, and Hawaii, the limit is set to $1,249,125. This limit updates yearly to adjust for the median home price from the previous year, which means that if your home were to exceed the loan limit in your area, it would be considered a jumbo loan.

These loans may have similar interest rates to conforming loans, but they often require higher credit scores and down payment amounts due to the larger loan size. You'll need to demonstrate a strong ability to handle the large monthly payment that comes with these loans.

Find the Right Mortgage for You

Buying a home involves numerous decisions. Choosing a mortgage type is one of your biggest choices. Not sure which mortgage is right for you? Get in touch with a First Residential loan expert at 1-833-919-1177 or start your online quote today.