Types of mortgage loans: Conventional, FHA, VA, USDA, Jumbo

The five programs at a glance

Almost every home loan in America is one of five types. Three are government-backed (FHA, VA, USDA), one is the standard market loan backed by Fannie Mae or Freddie Mac (Conventional), and one is for bigger loans (Jumbo). Here's the quick summary:

• Conventional

  3% minimum down for first-time buyers (5% otherwise). Backed by Fannie Mae or Freddie Mac. Most common loan in America. Needs decent credit (~620+).

• FHA

  3.5% minimum down with a 580+ credit score. More forgiving on credit history and DTI. Tradeoff: mortgage insurance for the life of the loan if down < 10%.

• VA

  Zero down for eligible veterans, active-duty service members, and surviving spouses. No monthly mortgage insurance. Funding fee at closing.

• USDA

  Zero down for eligible rural and suburban homes. Income limits apply (you have to earn under the area median to qualify).

• Jumbo

  Used when the loan exceeds the conforming loan limit ($806,500 in most counties for 2026). Stricter credit, larger reserves, often higher rates.

Conventional loans: the default option

A Conventional loan is a mortgage that meets the underwriting rules of Fannie Mae and Freddie Mac — the two government-sponsored enterprises that buy most of the mortgages in the country. Conventional loans aren't insured by the government, so they have stricter credit standards than FHA or VA loans, but they also have the cheapest mortgage insurance and let you cancel that insurance once you have 20% equity.

• Down payment: 3% for first-time buyers (Fannie's HomeReady, Freddie's Home Possible) or 5% standard. 10–20% gives you better rates and removes PMI sooner.
• Credit score: Typically 620+ for any approval, but best rates start around 740. See our credit score guide.
• DTI: Generally up to 43–50% back-end depending on credit and reserves.
• Mortgage insurance: PMI required if down < 20%, but it cancels automatically at 78% LTV (and you can request cancelation at 80%).
• Loan limits: $806,500 in most U.S. counties for 2026. Higher in designated high-cost areas.

FHA loans: built for forgiving credit

The FHA loan is insured by the Federal Housing Administration, part of HUD. The government insurance lets lenders approve borrowers with lower credit scores and shakier credit histories than they could on a Conventional loan. The trade-off is more expensive mortgage insurance that mostly stays for the life of the loan.

• Down payment: 3.5% with credit score 580+. 10% if your score is 500–579.
• Credit: 580 minimum for the 3.5%-down option. Recent collections, lower scores, and a single late payment are easier to overcome than on Conventional.
• DTI: Up to ~50% with compensating factors.
• Mortgage insurance (MIP): An upfront fee of 1.75% of the loan rolled into the balance, plus monthly MIP of about 0.55%. If you put less than 10% down, MIP stays for the life of the loan.
• Loan limits: $524,225 in most counties for 2026, higher in expensive markets (max around $1.2M in places like LA, SF, and Honolulu).

VA loans: the best deal in mortgage finance

The VA loan is guaranteed by the Department of Veterans Affairs. It's available to veterans, active-duty service members, members of the National Guard / Reserves with sufficient service, and surviving spouses of veterans who died in service or from a service-connected disability. Eligibility is established with a Certificate of Eligibility (COE) issued by the VA.

• Down payment: Zero. Yes, 0%. You can also bring money in to lower the funding fee.
• Credit: The VA itself doesn't set a minimum, but most lenders require 580–620+.
• DTI / residual income: The VA uses a unique residual income test in addition to DTI — they want to see you have enough money left after housing and debts each month to cover essentials.
• Mortgage insurance: None. Zero monthly MI.
• Funding fee: A one-time fee at closing (usually 2.15% for first-time use with no down payment, less with a down payment) that can be rolled into the loan. Disabled veterans are exempt.
• Loan limits: No cap if you have full entitlement.

USDA loans: rural and suburban, with income limits

The USDA Rural Development loan (technically the Section 502 Guaranteed Loan) is a zero-down loan for moderate-income buyers purchasing in eligible areas. "Rural" is misleading — most small towns and a lot of suburban fringe areas are eligible.

• Down payment: Zero.
• Property location: Must be in a USDA-eligible area. Use the USDA eligibility map to check.
• Income: Household income must be below 115% of the area median.
• Credit: 640+ for fastest underwriting; lower scores require manual underwriting.
• Guarantee fee: 1% upfront (rolled in) and 0.35% annual (monthly), in lieu of PMI.

Jumbo loans: when the price tag exceeds the limit

A jumbo loan is any mortgage that exceeds the conforming loan limit (the maximum size for a Fannie/Freddie loan). For 2026, that limit is $806,500 in most U.S. counties and goes up to about $1.21M in designated high-cost areas. Jumbo loans aren't backed by Fannie or Freddie, so each lender writes them to their own standards.

• Down payment: 10–20%+ typical. Some lenders go to 5% with strong credit and reserves.
• Credit: Usually 700+, often 720+ for best pricing.
• Reserves: Most jumbo lenders want 6–12 months of PITI in reserves after closing.
• DTI: Tighter — typically 43% maximum.
• Rates: Sometimes lower than Conventional, sometimes higher. Jumbos vary widely between lenders, so it really pays to shop.

Honorable mentions: other product types

• Non-QM / Bank statement loans: For self-employed borrowers whose tax returns under-represent their income. Higher rates, larger down payments, but a lifeline if your tax-return income won't qualify.
• HELOC and home equity loans: Second mortgages against existing equity. Useful for home improvements or consolidating debt — see our refinance guide.
• Construction loans: Short-term loans that fund a build, then convert to a permanent mortgage at completion.
• State / city DPA programs: Layer down-payment assistance grants and forgivable second loans on top of any of the loans above. See the down-payment guide for details.

Common questions