Types of Mortgages: The Complete Guide

Most U.S. homebuyers choose between two broad families of mortgage: conventional loans (backed by private lenders and the Fannie Mae / Freddie Mac standards) and government-backed loans (FHA, VA and USDA). Within those families you pick a rate structure — usually a fixed rate or an adjustable rate — and a term, most often 30 years. The best fit depends on your credit score, the cash you have for a down payment, the price of the home, and how long you plan to stay.

Below is every major mortgage type, what it costs, who qualifies, and the situations where each one genuinely makes sense. Once you’ve narrowed the field, price the monthly payment with a dedicated tool like the FHA Loan Calculator or the VA Loan Calculator.

Fixed-rate vs. adjustable-rate: the first fork in the road

Before the loan program, you choose how the interest rate behaves over time.

A fixed-rate mortgage keeps the same interest rate — and the same principal-and-interest payment — for the entire life of the loan. Your payment can still drift as property taxes and insurance change, but the rate never moves. That predictability is why fixed-rate loans dominate the U.S. market.

An adjustable-rate mortgage (ARM) starts with a lower fixed rate for an introductory period, then adjusts periodically based on a market index plus a set margin. A “5/6 ARM,” for example, is fixed for five years, then adjusts every six months. Caps limit how far the rate can move at each adjustment and over the life of the loan.

The trade-off is straightforward: an ARM usually offers a lower starting rate in exchange for taking on the risk that rates rise later. We cover this decision in depth in Fixed vs. Adjustable-Rate Mortgages, and you can model the adjustments with the Adjustable-Rate Mortgage Calculator.

Fixed-rate loan terms: 30, 20, 15 and 10 years

A fixed-rate loan comes in several term lengths, and the term changes both your monthly payment and your lifetime interest cost:

30-year fixed — the default. The longest common term means the lowest monthly payment, which keeps the most house within reach. The cost is more total interest, because you carry the balance longer.
20-year fixed — a middle ground. The payment is higher than a 30-year, but you build equity faster and pay noticeably less interest overall.
15-year fixed — a popular accelerator. Payments are substantially higher, but the rate is typically lower than a 30-year, and you own the home outright in half the time. Total interest can be dramatically lower.
10-year fixed — the shortest mainstream term, with the highest payment and the smallest total interest. It suits buyers who can comfortably afford a large payment and want to be debt-free quickly.

Shorter terms reward you with a lower rate and less interest; longer terms reward you with a lower payment and more borrowing power. To see how much interest the schedule front-loads, read How Mortgage Amortization Works.

Conventional and conforming loans

A conventional loan is any mortgage not insured or guaranteed by a government agency. Most conventional loans are also conforming, meaning they fall within the loan limits set each year by the Federal Housing Finance Agency and meet Fannie Mae / Freddie Mac underwriting standards, which lets lenders sell them on the secondary market.

Conventional loans are the workhorse of the market for borrowers with solid credit:

Down payment can be as low as 3% for some first-time-buyer programs, though more is common.
Credit generally needs to be in the mid-600s or higher to qualify, with the best pricing reserved for higher scores.
Private mortgage insurance (PMI) is required when you put down less than 20% — but unlike FHA insurance, PMI can be cancelled once you reach roughly 20% equity. See Understanding PMI.

Conventional financing tends to be the cheapest option over time for buyers who can clear the credit bar and avoid or quickly shed PMI.

FHA loans

An FHA loan is insured by the Federal Housing Administration and built to widen access to homeownership. It’s the go-to program for buyers with lower credit scores or thin savings.

Down payment as low as 3.5% with a qualifying credit score; higher down payments are required at the lowest score tiers.
Credit requirements are more forgiving than conventional, which is the program’s main appeal.
Mortgage insurance comes in two parts: an upfront premium (often financed into the loan) and an annual premium paid monthly. On most FHA loans today, that annual premium lasts the life of the loan unless you refinance out.

FHA makes the most sense when your credit or down payment would make a conventional loan expensive or out of reach. Many borrowers use FHA to get in, build equity and credit, then refinance into a conventional loan to drop mortgage insurance. Run the numbers with the FHA Loan Calculator.

VA loans

A VA loan is guaranteed by the U.S. Department of Veterans Affairs and is one of the strongest mortgage benefits available — reserved for eligible active-duty service members, veterans and certain surviving spouses.

Down payment of 0% on most purchases. No down payment is the headline benefit.
No monthly mortgage insurance, which makes the payment lighter than a comparable low-down-payment conventional or FHA loan.
Funding fee — a one-time fee (which can be financed) replaces ongoing insurance; some veterans, such as those with a service-connected disability rating, are exempt.

If you’re eligible, a VA loan is almost always worth comparing first. Price it with the VA Loan Calculator.

USDA loans

A USDA loan, backed by the U.S. Department of Agriculture, supports homeownership in eligible rural and many suburban areas.

Down payment of 0% for borrowers who qualify.
Income limits apply — the program targets low-to-moderate-income households, so earning above the area cap disqualifies you.
Location must fall within a USDA-eligible area, which covers a surprisingly large share of the map outside major metros.
Guarantee fees function like a modest mortgage insurance cost, split between an upfront fee and an annual fee.

USDA fits buyers in qualifying areas who meet the income limits and want to avoid a down payment.

Jumbo loans

A jumbo loan exceeds the conforming loan limit for the county, so it can’t be sold to Fannie Mae or Freddie Mac. Lenders keep more of the risk, which means tighter standards.

Down payment requirements are usually higher, often well above the minimums on conforming loans.
Credit expectations are stricter, and lenders typically want strong cash reserves on top of the down payment.
Documentation of income and assets is more rigorous.

Jumbo loans are simply the path to financing a high-priced home that a conforming loan can’t cover. Estimate the payment with the Jumbo Mortgage Calculator.

Comparing the main loan types

Loan type	Typical minimum down	Credit profile	Mortgage insurance	Best for
Conventional / conforming	3%–5%	Mid-600s and up	PMI under 20% down; cancellable	Buyers with solid credit who can shed PMI
FHA	3.5%	Lower scores accepted	Upfront + annual; often for the life of loan	Lower credit or limited savings
VA	0%	Flexible	None	Eligible service members and veterans
USDA	0%	Flexible	Upfront + annual guarantee fee	Moderate-income buyers in eligible areas
Jumbo	Higher (often 10%+)	Strong, with reserves	Varies by lender	Financing above the conforming limit

Numbers are general rules of thumb; specific minimums vary by lender, program year and your full financial picture.

Specialty and secondary mortgage types

Beyond the mainstream programs, a few specialized structures solve specific problems:

Interest-only mortgages let you pay only the interest for an introductory period, keeping early payments low. The catch: you build no equity during that window, and payments jump sharply once principal kicks in. They suit borrowers with irregular or back-loaded income who understand the risk.
Balloon mortgages carry low payments for a short term, then require a single large lump-sum payment of the remaining balance. They’re niche and best left to borrowers with a concrete plan to sell or refinance before the balloon comes due.
Construction loans finance the building of a home rather than the purchase of an existing one. They’re typically short-term, interest-only during construction, and then convert to a permanent mortgage (a “construction-to-permanent” loan) once the home is finished.
Second mortgages — including the home equity loan and the home equity line of credit (HELOC) — let you borrow against equity you’ve already built. A home equity loan delivers a lump sum at a fixed rate; a HELOC works like a revolving credit line you draw from as needed. Both use your home as collateral, so missed payments put the property at risk.

How to choose the right mortgage

The decision usually comes down to four questions:

How’s your credit and down payment? Strong credit and 20% down point toward a conventional loan; a thinner profile points toward FHA, VA or USDA.
Are you eligible for a government program? VA and USDA can beat everything else on cost — but only if you qualify. Always check eligibility first.
How long will you stay? A short expected stay can make an ARM’s lower starting rate worthwhile; a long stay rewards the certainty of a fixed rate.
What’s the home’s price? Above the conforming limit, a jumbo loan is the only conventional route.

Whatever direction you lean, get pre-approved before you shop so you know the real number — our guide to How to Qualify for a Mortgage walks through exactly what lenders check. And before you commit, weigh the full upfront cost of any loan with Closing Costs Explained.

Frequently asked

Which mortgage type is cheapest? For eligible borrowers, VA loans are often cheapest because they require no down payment and no monthly mortgage insurance. For everyone else, a conventional loan that avoids or quickly cancels PMI usually wins over time.

Can I switch loan types later? Yes — refinancing lets you change programs, terms or rate structure. Many buyers start with FHA and refinance into a conventional loan to drop mortgage insurance once they’ve built equity. See When to Refinance.

Is a 15-year or 30-year fixed better? Neither is universally better. A 15-year saves significant interest and builds equity fast but demands a much higher payment; a 30-year keeps payments low and preserves cash flow. Match the term to your budget and goals.

This guide is general educational information, not financial advice. Confirm specifics with a licensed lender or advisor.