Most Common Types of Mortgage Loans

Blog Summary:

There are 5 main types of mortgage loans: conventional, jumbo, government-backed, fixed-rate, and adjustable-rate mortgages.
The best loan for you depends on factors like credit score, down payment size, property value, and long-term plans.
Jumbo loans serve high-value properties, while FHA, VA, and USDA loans offer lower or no down payment options.
Fixed-rate mortgages provide stability, while ARMs can offer lower short-term rates.
Envado simplifies home financing with vetted lenders, no spammy callbacks, and clear loan comparisons.

Choosing the right home mortgage loan might just be the most important financial decision you’ll make during your lifetime.

With so many options out there, settling for the first loan you’re approved for might not actually be the smartest option.

So, you might be wondering, “What is the best type of mortgage loan?” Truthfully, the answer to that question depends heavily on your budget, lifestyle, and long-term financial goals.

With that being said, it’s wise to educate yourself about the different types of mortgage loans available to you. That way, you can choose the kind that’s best suited to your unique needs.

What Are the 4 Types of Mortgage Loans?

Depending on how they are classified, there are either 3, 4, or 5 main types of mortgage loans. When grouped into just four categories, the main types of mortgage loans are:

Conventional loans
FHA loans
VA loans
USDA loans

Most sources, however, delineate 5 rather than 4 main types of mortgage loans, with these 5 types of loans being:

Conventional loans
FHA loans
VA loans
USDA loans
Jumbo loans

While they’re technically a type of conventional loan, most sources separate jumbo loans from standard conventional loans because they are designed specifically for high-value properties.

On the other end of the spectrum, other sources (including the Consumer Financial Protection Bureau) separate loans into just 3 much broader categories:

Conventional loans (representing the majority of loans, and which are further split into conforming vs. nonconforming loans)
Government loans (which include FHA loans, VA loans, and USDA loans)
Special programs (which include loans from state or local housing agencies to middle-income buyers, lower-income buyers, and more, or special-purpose credit programs from private lenders to low-to-middle-income borrowers in targeted communities)

For the purposes of this article, we’ll group mortgage loans into five categories, which is perhaps the most common way of grouping them.

Learn About Each Type of Mortgage Loan

Below, we’ll cover the best types of mortgage loans for first-time buyers, the best types of mortgage loans with no down payment, and more.

Conventional Loans: The most widely used type of mortgage loan, conventional loans are usually best for borrowers with solid credit scores and decent income. In most cases, to qualify for a conventional loan, you’ll need to have a credit score above 620 and leave a down payment of 5% or more, with down payments of up to 20% being fairly common.
Jumbo Loans: Jumbo loans are designed for high-value properties that exceed the conforming loan limits set by the Federal Housing Finance Agency. Therefore, they require higher credit scores (often 700 or above) in addition to larger down payments.
Government-Backed Loans: These include FHA loans, which are well-known for having low down payments (as little as around 3.5%). They also often include VA loans, which are only available to eligible veterans, active-duty service members, and surviving spouses. Notably, they often require no down payment and no mortgage insurance. Lastly, they include USDA loans, which target low-to-moderate income buyers in rural areas, and which also often require no down payment.
Fixed-Rate Mortgages: This type of mortgage loan locks in your interest rate and monthly payments over the life of the loan. This makes them ideal for borrowers who seek stability and who also plan to stay long-term in their home.
Adjustable-Rate Mortgages (ARMs): This type of mortgage loan normally starts with a low introductory rate, which adjusts periodically after the fixed period ends. For this reason, ARMs are usually only idea if you plan to move or refinance your home within a few years.

What’s the Best Type of Mortgage Loan for Me?

Choosing the right type of mortgage loan for you doesn’t have to be difficult. Here are some high-level guidelines to follow based on your situation.

Scenario	Recommended Loan Type
First-time buyer with limited savings	FHA loan
Veteran or military family	VA loan
Rural homebuyer with moderate income	USDA loan
Buying a high-value property	Jumbo loan
Strong credit and down payment	Conventional or fixed-rate loan

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