Which Loan Is Right for You as a Homebuyer?

Buying a home is one of the biggest financial moves you’ll ever make—and choosing the right mortgage is just as important as choosing the right house. The type of loan you pick can affect your monthly payment, how much home you can afford, and even how fast you build equity. With so many mortgage options out there, it’s easy to feel overwhelmed. But understanding the basics can help you make a smart, confident decision. 

What Are the Types of Mortgages?

What’s a Conventional Mortgage?

A conventional loan isn’t backed by the government. You usually get it from a private lender like a bank or credit union. It often requires a credit score of 620 or higher. You’ll likely need a down payment of at least 3% to 5%.

If your down payment is less than 20%, you’ll pay private mortgage insurance (PMI). That adds to your monthly cost until you reach enough equity. Conventional loans are best for buyers with strong credit and steady income.

How Is an FHA Loan Different?

An FHA loan is backed by the Federal Housing Administration. It's designed for buyers with lower credit or limited savings. You can qualify with a credit score as low as 580 and a down payment of just 3.5%.

There’s one catch: you’ll pay a mortgage insurance premium (MIP) up front and as part of your monthly payment. Unlike PMI on conventional loans, MIP may last for the life of the loan unless you refinance. FHA loans are a solid option if you’re buying your first home and need a little flexibility.

What Is a VA Loan?

A VA loan is for active military, veterans, and eligible surviving spouses. It’s backed by the Department of Veterans Affairs and comes with major perks. There’s no down payment required, and you won’t pay mortgage insurance.

You still need to meet the lender’s credit and income standards. There’s also a one-time VA funding fee, which helps offset the cost to taxpayers. VA loans offer some of the most favorable terms—if you qualify, they’re worth a close look.

What Makes a USDA Loan Unique?

USDA loans are backed by the U.S. Department of Agriculture and support homeownership in rural and some suburban areas. There’s no down payment required, and the credit score requirement is usually 640 or higher.

You must meet income limits, which vary by region and household size. The home also has to be in a USDA-approved area. If you're open to living outside the city, a USDA loan could help you get more house for your money.

What’s the Difference Between Fixed-Rate and Adjustable-Rate Mortgages?

A fixed-rate mortgage has the same interest rate for the life of the loan. Your monthly payment stays the same, which makes it easy to plan your budget. These loans usually come in 15-year or 30-year terms.

An adjustable-rate mortgage (ARM) starts with a lower rate, often for the first 5 to 7 years. After that, the rate can change once a year based on the market. If you’re planning to move or refinance before the rate adjusts, an ARM could save you money early on.

How Do Jumbo Loans Work?

A jumbo loan is used when the home price exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. In most areas, that’s anything over $766,550. These loans are common in high-cost housing markets.

You’ll need strong credit, a large down payment (usually 10% to 20%), and a low debt-to-income ratio. Since the lender takes on more risk, rates can be slightly higher. If you're buying a luxury home or property in an expensive area, a jumbo loan may be your only option.

Which Loan Is Right for You?

Here’s a quick side-by-side:

Think about your long-term plans. Will you stay in the home for many years, or is it a short-term stop? Do you have money saved, or do you need low upfront costs? Do you want stable payments or lower rates early on?

A mortgage isn’t one-size-fits-all. Talk to your lender or real estate agent to match the loan to your needs and goals. The right mortgage makes your home purchase more secure—and much less stressful.