Mortgage Types Explained: Conventional, FHA, VA, USDA, Jumbo, Fixed & ARM
Picking the right mortgage type is one of the largest financial decisions you'll ever make — it affects your monthly payment, your interest rate, how much you need for a down payment, and whether you'll pay mortgage insurance for years or decades. This cornerstone guide walks through every major US mortgage program, with eligibility rules, PMI/MIP mechanics, side-by-side comparisons, and a worked example on a $350,000 home.
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Table of contents
- 1. Overview of US mortgage types
- 2. Conventional mortgages
- 3. FHA loans
- 4. VA loans
- 5. USDA loans
- 6. Jumbo loans
- 7. Fixed-rate mortgages
- 8. Adjustable-rate mortgages (ARMs)
- 9. PMI and MIP rules
- 10. Pros and cons of each type
- 11. Side-by-side comparison
- 12. Example: $350,000 home
- 13. Decision framework
- 14. Frequently asked questions
Overview of US mortgage types
US mortgages fall into two overlapping categories. Loan program describes who backs or qualifies the mortgage: conventional (Fannie Mae / Freddie Mac), FHA (Federal Housing Administration), VA (Department of Veterans Affairs), USDA (US Department of Agriculture), or jumbo (private, above conforming limits). Rate structure describes how your interest rate behaves over time: fixed-rate stays constant for the entire loan term, while adjustable-rate (ARM) starts fixed for an introductory period and then adjusts periodically.
Every mortgage combines one program with one rate structure. The most common combination in the US is a 30-year fixed-rate conventional loan, but the right choice depends on your credit score, down payment, military service, location, household income, and how long you plan to stay in the home. The next sections walk through each option in detail.
Conventional mortgages
A conventional mortgage is any loan that isn't insured or guaranteed by the federal government. Most conventional loans are conforming — meaning they meet Fannie Mae and Freddie Mac guidelines, which lets lenders sell them on the secondary market. This is the default mortgage for borrowers with good credit and a reasonable down payment.
Eligibility
- Credit score: typically 620+ (best pricing at 740+)
- Debt-to-income ratio: usually capped at 43–50%
- Two years of stable employment and income
- Documentation of assets, including down payment source
Down payment
As low as 3% for first-time buyers using Fannie Mae HomeReady or Freddie Mac HomePossible (income limits apply), 5% for standard borrowers, and 20% to avoid PMI. Larger down payments unlock incrementally better interest rate tiers.
Mortgage insurance
Private mortgage insurance (PMI) applies if you put less than 20% down. PMI is cancellable — it automatically falls off at 78% loan-to-value (LTV) based on the original amortization schedule, and you can request removal at 80% LTV. This is the single biggest advantage of conventional over FHA: you can stop paying mortgage insurance.
Run the math on different down payments using the Down Payment Calculator, and see exactly how PMI affects your monthly payment in the Mortgage Calculator.
FHA loans
FHA loans are insured by the Federal Housing Administration and designed to expand homeownership to borrowers with lower credit scores or smaller down payments. The FHA doesn't originate loans — it insures them, which lets approved lenders extend credit on more forgiving terms.
Eligibility
- Credit score: 580+ with 3.5% down, or 500–579 with 10% down
- Debt-to-income ratio: up to 50% (and sometimes higher with compensating factors)
- Property must be your primary residence and meet FHA appraisal standards
- Loan limits vary by county — typically $498k baseline, up to ~$1.15M in high-cost areas
Down payment
3.5% with credit score of 580 or higher. Gifted funds from family are allowed for the entire down payment, and many states offer down payment assistance compatible with FHA.
Mortgage insurance (MIP)
FHA loans carry mortgage insurance premium (MIP) in two parts: an upfront premium of 1.75% of the loan amount (typically financed into the loan), plus an annual MIP of around 0.55% paid monthly. If you put less than 10% down, MIP stays for the life of the loan; with 10%+ down, it cancels after 11 years. To remove MIP earlier, most borrowers refinance into a conventional loan once they reach 20% equity.
For a deeper comparison, see our FHA vs Conventional Loan guide.
VA loans
VA loans are guaranteed by the Department of Veterans Affairs and reserved for qualifying veterans, active-duty service members, National Guard and Reserve members, and certain surviving spouses. They're widely considered the most powerful mortgage product in the US for those who qualify.
Eligibility
- Valid Certificate of Eligibility (COE) from the VA
- No government-set minimum credit score, but most lenders require 620+
- Sufficient residual income (a unique VA standard beyond DTI)
- Property must be your primary residence
Down payment and fees
0% down is allowed up to the conforming loan limit. Instead of mortgage insurance, VA loans charge a one-time funding fee of about 2.15% on first use (1.25% with 10% down) or 3.3% on subsequent uses. The fee can be financed into the loan and is waived for veterans with service-connected disabilities.
For an in-depth comparison, see VA Loan vs Conventional Mortgage.
USDA loans
USDA loans (officially the Section 502 Guaranteed Rural Housing Loan) are backed by the US Department of Agriculture and designed to encourage homeownership in designated rural and many suburban areas. Despite the name, they aren't tied to agricultural use — eligibility is based on the property's location and the borrower's income.
Eligibility
- Property in a USDA-eligible area (about 97% of US land by area qualifies)
- Household income at or below 115% of the area median income
- Credit score typically 640+ for streamlined approval
- Primary residence only
Down payment and fees
0% down is allowed. USDA loans charge a 1% upfront guarantee fee (financed) and a 0.35% annual fee (paid monthly) for the life of the loan — meaningfully lower than typical PMI or FHA MIP. For eligible buyers in qualifying areas, USDA is often the cheapest way to buy a home with no down payment.
Jumbo loans
Jumbo loans exceed the conforming loan limits set annually by the Federal Housing Finance Agency. For 2026, the baseline conforming limit is approximately $806,500, rising to roughly $1,209,750 in designated high-cost counties. Any loan above the applicable limit is a jumbo.
Eligibility
- Credit score: 700+ (often 740+ for best pricing)
- Debt-to-income ratio: typically 43% or lower
- 6–12 months of cash reserves after closing
- Full documentation of income, assets, and employment
Down payment
Down payment requirements vary by lender but typically start at 10–20%. Some lenders allow jumbo loans with as little as 5–10% down for high-credit borrowers but charge a premium rate or require alternative collateral. Interest rates on jumbo loans can be slightly higher or lower than conforming rates depending on market conditions.
Fixed-rate mortgages
A fixed-rate mortgage keeps the same interest rate for the entire loan term, typically 15, 20, or 30 years. Your principal-and-interest payment never changes. Property tax and insurance escrow can adjust, but the loan portion is locked.
Why borrowers choose fixed
- Predictable monthly payment for budgeting
- Protection from rising interest rates
- Simplicity — no rate caps, adjustment dates, or index tracking
15-year vs 30-year fixed
A 15-year fixed carries an interest rate roughly 0.5–0.75% lower than a 30-year and pays off in half the time, but the monthly payment is about 40–50% higher. A 30-year offers cash-flow flexibility — you can always pay extra voluntarily, but you aren't locked into a higher payment if income drops. Most planners suggest the 30-year for households who want optionality and the 15-year for high-income, stable households focused on debt freedom.
See the principal-versus-interest dynamics in the Mortgage Amortization Calculator.
Adjustable-rate mortgages (ARMs)
An adjustable-rate mortgage starts with a fixed introductory rate for a set period — commonly 5, 7, or 10 years — and then adjusts periodically (usually every 6 or 12 months) based on a published index plus a margin. Common structures are 5/6, 7/6, and 10/6 ARMs, where the first number is the initial fixed period in years and the second is the adjustment frequency in months.
How ARM rates adjust
ARMs use rate caps to limit how much the rate can change. A common cap structure is 2/1/5 — the rate can rise no more than 2% at the first adjustment, 1% at each subsequent adjustment, and 5% over the life of the loan. This limits payment shock but doesn't eliminate it.
When an ARM makes sense
- You expect to sell or refinance before the introductory period ends
- The introductory rate is meaningfully lower than current fixed rates
- You can comfortably afford the maximum possible payment after adjustment
- You expect rates to fall or stay flat over your holding period
Read our deeper comparison in Fixed vs Adjustable Mortgage.
PMI and MIP rules at a glance
Mortgage insurance protects the lender if you default — it doesn't protect you. It's required on most loans with less than 20% down, and the rules vary sharply by loan type. Here's how they compare:
| Loan type | Upfront fee | Ongoing fee | Cancellation |
|---|---|---|---|
| Conventional (PMI) | None | 0.3%–1.5% / yr | Auto at 78% LTV; request at 80% |
| FHA (MIP) | 1.75% of loan | ~0.55% / yr | Life of loan (<10% down); 11 yrs (10%+) |
| VA | 2.15% funding fee (first use) | None | N/A — no monthly MI |
| USDA | 1% guarantee fee | 0.35% / yr | Life of loan |
| Jumbo | Varies | Often none with 20% down | Lender-specific |
For a deeper breakdown of how down payment size affects mortgage insurance and lifetime cost, see our pillar guide on how much down payment you need.
Pros and cons of each mortgage type
| Type | Pros | Cons |
|---|---|---|
| Conventional | PMI cancellable; best long-run pricing; flexible property types; works for second homes and investment properties | Stricter credit requirements; larger down payment for best rates |
| FHA | Low credit score OK; small down payment; lenient DTI; gifted funds allowed | MIP often for life of loan; property must meet FHA standards; loan limits |
| VA | 0% down; no monthly MI; competitive rates; lenient credit treatment | Eligibility limited to military; funding fee; primary residence only |
| USDA | 0% down; low annual fee; competitive rates | Property location restrictions; income limits; primary residence only |
| Jumbo | Finances high-priced homes; can be competitive with conforming | Higher credit and reserves required; larger down payment; more underwriting scrutiny |
| Fixed-rate | Payment certainty; protection from rising rates; simple to understand | Higher starting rate than ARMs; no automatic savings if rates fall (must refinance) |
| ARM | Lower introductory rate; cheaper if you sell or refinance before adjustment | Payment shock risk; complexity; requires active monitoring |
Side-by-side comparison
A consolidated view of eligibility, down payment, mortgage insurance, and best-fit borrower for each loan program:
| Program | Min credit | Min down | Mortgage insurance | Best fit |
|---|---|---|---|---|
| Conventional | 620 | 3–5% | PMI; cancels at 80% LTV | Solid credit; planning to stay long-term |
| FHA | 580 (3.5% down) | 3.5% | MIP, often life of loan | Lower credit; small down payment |
| VA | 620 typical | 0% | None (funding fee) | Eligible veterans & service members |
| USDA | 640 | 0% | 0.35% / yr for life | Rural/suburban; moderate income |
| Jumbo | 700+ | 10–20% | Often none at 20% down | High-priced home; strong reserves |
Example: monthly payments on a $350,000 home
To make the trade-offs concrete, here's an estimated monthly principal & interest payment for a $350,000 home under each program. Assumptions: 30-year term, indicative 6.75% rate on conventional/jumbo, 6.50% on FHA/VA/USDA (slightly lower due to government backing), property tax 1.1% and insurance $1,500/year added separately. PMI/MIP/USDA fees shown where applicable. These figures are illustrative — your actual rate depends on credit, market conditions, and lender pricing.
| Loan | Down | Loan amount | P&I | MI / fee | Taxes + insurance | Est. total |
|---|---|---|---|---|---|---|
| Conventional 5% down | $17,500 | $332,500 | $2,157 | $222 (PMI 0.8%) | $446 | ~$2,825 |
| Conventional 20% down | $70,000 | $280,000 | $1,816 | $0 | $446 | ~$2,262 |
| FHA 3.5% down | $12,250 | $343,663* | $2,172 | $157 (MIP 0.55%) | $446 | ~$2,775 |
| VA 0% down | $0 | $357,525* | $2,260 | $0 | $446 | ~$2,706 |
| USDA 0% down | $0 | $353,500* | $2,234 | $103 (0.35%) | $446 | ~$2,783 |
*Includes financed upfront fee (FHA 1.75% MIP, VA 2.15% funding fee, USDA 1% guarantee fee). Property tax assumed at 1.1% of home price; insurance at $1,500/year. Run your exact scenario in the Mortgage Calculator.
Decision framework: choosing the right mortgage
Pick your loan in two steps. First, narrow the program using eligibility and economics. Then choose the rate structure based on how long you plan to stay.
Step 1 — Choose the program
- VA eligible? Start with VA. No down payment, no monthly MI, competitive rate — almost always the best deal.
- USDA-eligible area and income? USDA is often the cheapest 0%-down path outside metro cores.
- Credit under 680 or down payment under 5%? FHA usually beats conventional on monthly cost, with the plan to refinance to conventional once you have 20% equity.
- Strong credit (700+) and 5%+ down? Conventional, because PMI cancels.
- Home above conforming limits? Jumbo, with the largest down payment you can comfortably make.
Step 2 — Choose the rate structure
- Staying 7+ years and value certainty? 30-year fixed.
- Stable, high income and want to be debt-free fast? 15-year fixed.
- Confident you'll move or refinance within 5–7 years and the ARM rate is at least 0.5% lower? Consider a 7/6 ARM.
- Unsure? Default to the 30-year fixed — paying extra is always optional, but locking in a stable payment isn't.
Whichever combination you pick, target a total monthly housing cost (PITI plus any MI) at or below 28% of your gross monthly income, and total debt payments at or below 36%. See the 28/36 rule for details.
Compare any mortgage type instantly
Plug your price, down payment, and rate into the Mortgage Calculator and see PITI plus PMI in seconds.
Frequently asked questions
What are the main types of mortgages in the US?
The seven most common mortgage types are conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, fixed-rate mortgages, and adjustable-rate mortgages (ARMs). Conventional, FHA, VA, USDA, and jumbo describe who backs or qualifies the loan; fixed-rate and ARM describe how the interest rate behaves over time. Every mortgage is a combination of both — for example, a 30-year fixed-rate FHA loan, or a 7/1 ARM conventional loan.
Which mortgage type has the lowest down payment?
VA and USDA loans allow 0% down for eligible borrowers — VA for qualifying veterans, active-duty service members, and certain surviving spouses; USDA for moderate-income buyers in designated rural and suburban areas. After those, FHA loans require 3.5% down (with a credit score of 580+), and conventional first-time buyer programs go as low as 3% down.
What's the difference between a conventional loan and an FHA loan?
Conventional loans are not insured by the federal government and follow Fannie Mae or Freddie Mac guidelines. They typically require a credit score of 620+ and offer better long-term economics for borrowers who can put 10–20% down. FHA loans are insured by the Federal Housing Administration, allow credit scores as low as 580 with 3.5% down (or 500 with 10% down), and are more forgiving on debt-to-income ratio — but the mortgage insurance premium (MIP) usually lasts for the life of the loan unless you refinance.
When does PMI cancel on a conventional loan?
Private mortgage insurance (PMI) on a conventional loan cancels automatically when your loan balance reaches 78% of the original home value, based on the original amortization schedule. You can also request cancellation once you reach 80% loan-to-value (LTV), either through paydown or appreciation (with a new appraisal). This is a major advantage over FHA, where MIP typically stays on for the life of the loan if you put less than 10% down.
What is a jumbo loan and when do I need one?
A jumbo loan is any mortgage that exceeds the conforming loan limit set annually by the Federal Housing Finance Agency. For 2026, the baseline limit is around $806,500 in most US counties and roughly $1,209,750 in high-cost areas. Loans above those thresholds are jumbo loans. They typically require a higher credit score (700+), larger down payment (often 10–20%+), and 6–12 months of cash reserves.
Is a fixed-rate or adjustable-rate mortgage better?
Fixed-rate mortgages give you payment certainty for the entire loan term, which is valuable if you plan to stay in the home long-term or want to protect against rising rates. Adjustable-rate mortgages start with a lower introductory rate (typically for 5, 7, or 10 years) and then adjust periodically based on a market index. ARMs can save money if you'll move or refinance before the adjustment period ends, but they expose you to payment shock if rates rise. As a rule of thumb: fixed for stability, ARM for short time horizons or strong refinance plans.
What credit score do I need for each mortgage type?
Approximate minimums are: FHA 580 (or 500 with 10% down), VA no government-set minimum but most lenders want 620+, USDA 640, conventional 620, and jumbo 700+. These are floors — actual approval and interest rate pricing depend on your full profile, including debt-to-income ratio, down payment, and reserves.
Can I use a VA loan more than once?
Yes. VA loan entitlement can be restored and reused multiple times. You can have more than one VA loan at the same time in some cases (for example, when relocating for active-duty service), and the VA funding fee is reduced on the first use but higher on subsequent uses unless waived for service-connected disability.
Are USDA loans only for farmers?
No. USDA loans support homeownership in designated rural and many suburban areas — not agricultural use. About 97% of US land is eligible by area, and many buyers are surprised that small towns and exurbs near major metros qualify. Income must fall within the program's limits (typically 115% of area median income).
What's the difference between MIP and PMI?
MIP (mortgage insurance premium) is the insurance on an FHA loan and is paid both upfront (1.75% of the loan amount, financed) and monthly. PMI (private mortgage insurance) is the insurance on a conventional loan when you put less than 20% down. PMI is cancellable; MIP typically isn't (with less than 10% down on FHA). Both protect the lender, not you.
How do I choose between a 15-year and 30-year mortgage?
A 15-year mortgage carries a lower interest rate and saves significantly on total interest, but the monthly payment is roughly 40–50% higher. A 30-year gives you cash-flow flexibility and the option to pay extra voluntarily. Most planners suggest the 30-year for households who want optionality (to invest the difference, build emergency reserves, or weather a job change), and the 15-year for high-income, stable households focused on debt freedom.
Can I refinance from one mortgage type to another?
Yes, and many borrowers do. A common path is FHA → conventional once you've built 20% equity, which eliminates lifetime MIP and lowers the monthly payment. VA borrowers can use the VA IRRRL (Interest Rate Reduction Refinance Loan) to lower their rate with minimal paperwork. ARM borrowers often refinance into a fixed-rate loan before the first adjustment if rates have moved in their favor.
Do I need 20% down to avoid mortgage insurance?
On a conventional loan, yes — putting 20% down avoids PMI entirely. On VA loans there is no mortgage insurance regardless of down payment (a funding fee applies instead). On USDA loans, an annual guarantee fee applies but it's lower than typical PMI. On FHA loans, putting 10%+ down lets MIP cancel after 11 years rather than lasting the life of the loan.
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Educational content only — not financial, tax, or legal advice. Mortgage rules, rate ranges, and loan limits change frequently; verify current figures with a licensed loan officer before making a decision.