Types of Mortgages: A Simple Guide for First-Time Buyers
There are many kinds of home loans, and each one works a little differently. This guide explains the main loan programs first (FHA, Conventional, VA, USDA, Jumbo), then the rate types (Fixed vs Adjustable), so you can understand your options in clear, simple terms.
Conventional Loans
Conventional loans are the most common type of mortgage.
Best for: buyers with good credit and steady income
Credit score: 620+
Down payment: 3%–20%
Simple facts:
Lower interest rates if you have strong credit
PMI goes away once you reach 20% equity
Works for many home types
Conventional loans give you the most flexibility if you qualify.
FHA Loans
FHA loans are popular with first-time buyers because they are easier to qualify for.
Best for: buyers with lower credit or smaller down payments
Credit score: 580+
Down payment: 3.5%
Simple facts:
Easier credit and debt requirements
Allows higher DTI
Requires mortgage insurance (MIP), often for the life of the loan
FHA helps buyers who need a little extra support to qualify.
VA Loans
VA loans are for eligible military members, veterans, and surviving spouses.
Best for: qualifying buyers who want zero down
Down payment: 0%
Credit score: no official minimum (lenders often want 580–620)
Simple facts:
No PMI
Lower rates than many other loans
Only for primary residences
VA loans are one of the best benefits for those who qualify.
USDA Loans
USDA loans help buyers looking in eligible rural and some suburban areas.
Best for: low-to-moderate income buyers in qualifying areas
Down payment: 0%
Credit score: usually 640+
Simple facts:
No down payment required
Income limits apply
Must be in a USDA-approved area
Many areas people think are “rural” actually qualify.
Jumbo Loans
Jumbo loans are for homes priced above standard loan limits.
Best for: high-income buyers purchasing more expensive homes
Down payment: often 20%+
Credit score: typically 700+
Simple facts:
Higher loan amounts
Stricter credit and income rules
May have higher interest rates
Most first-time buyers do not need a jumbo loan.
Now Let’s Talk About Rate Types
Loan programs (FHA, Conventional, VA, USDA, Jumbo) describe who the loan is for and what rules it follows.
Rate types describe how your interest rate behaves.
Fixed-Rate Mortgages
A fixed-rate mortgage has the same interest rate for the entire loan.
Best for: buyers who want stable, predictable payments
Common loan lengths: 15 years or 30 years
Simple facts:
Payment stays the same
Easier to budget
Most common choice for long-term owners
Adjustable-Rate Mortgages (ARMs)
With an ARM, your interest rate can change over time.
Best for: buyers who plan to move or refinance within a few years
Common types: 5/1 ARM, 7/1 ARM, 10/1 ARM
Simple facts:
Lower rate in the beginning
Rate may go up or down later
Good for short-term plans, not always long-term
Find Out How Ready You Are to Buy a Home
A quick, free way to understand what you’re ready for and what you should focus on next.
Which Mortgage Type Is Right for You?
It depends on your:
Credit score
Income
Down payment
Monthly budget
How long you plan to stay in the home
If you’re not sure where you fit, the Home Readiness Check™ can help point you in the right direction.
Summary
Mortgage types fall into two big groups:
(1) Loan programs like FHA, Conventional, VA, USDA, and Jumbo
(2) Rate types like Fixed and Adjustable
Understanding both helps you choose a loan that fits your budget and goals. Explore more mortgage guides in the Learn Hub or try the Home Readiness Check™ to see what type of loan might fit your situation.