5 types of mortgage loans for homebuyers

To help you find the right home loan, here’s our guide to the five main types of mortgages.

Types of home loans

There are five main kinds of mortgages, each with its own benefits and features.

• Conventional loan: Best for borrowers with good credit scores
• Jumbo loan: Best for borrowers with good credit looking to buy a more expensive home
• Government-backed loan: Best for borrowers with lower credit scores and minimal cash for a down payment
• Fixed-rate mortgage: Best for borrowers planning to stay in the home for a long time
• Adjustable-rate mortgage: Best for borrowers planning to move or refinance within the first few years of the loan term

1. Conventional loan

Conventional loans, the most popular type of mortgage, come in two flavors: conforming and non-conforming.

• Conforming loans: A conforming loan “conforms” to a set of Federal Housing Finance Agency (FHFA) standards, including guidelines around credit, debt and loan size. When a conventional loan meets these standards, it’s eligible to be purchased by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that comprise much of the mortgage market.
• Non-conforming loans: These loans do not meet one or more of the FHFA’s standards. One of the most common types of non-conforming loan is a jumbo loan, a mortgage that exceeds the conforming loan limit. Non-conforming loans can’t be purchased by the GSEs, so they’re a riskier prospect for lenders.

Who are conventional loans best for?

If you have a strong credit score and can afford to make a sizable down payment, a conventional mortgage is the best pick. They offer more flexibility than government-backed loans — for example, you can use a conventional loan to buy a vacation home or other non-primary residence — and they tend to charge fewer fees.

2. Jumbo loan

Jumbo mortgages are home loans in an amount that surpasses the FHFA’s conforming loan limits. In 2025, that means any loan of more than $806,500, or $1,209,750 in higher-cost areas. Because these are bigger loans and can’t be purchased by the GSEs, they can present more risk and have more stringent qualifying criteria than conventional loans. 

Who are jumbo loans best for?

If you’re looking to finance a home with a purchase price exceeding the current conforming loan limits, and you can meet the lender’s requirements, a jumbo loan is the best route. You’ll need to have excellent credit, a low debt-to-income (DTI) ratio and substantial assets.

3. Government-backed loan

The U.S. government isn’t a mortgage lender, but it does play a role in making homeownership accessible to more Americans by backing three main types of mortgages:

• FHA loans: Insured by the Federal Housing Administration (FHA), FHA loans can be had with a credit score as low as 580 and a 3.5 percent down payment, or a score as low as 500 with 10 percent down. FHA loans also require you to pay mortgage insurance premiums, adding to your costs. These premiums help the FHA insure lenders against borrowers who default. In addition, the maximum amount you can borrow with an FHA loan is lower than the ceiling for conventional conforming loans.
• VA loans: Guaranteed by the U.S. Department of Veterans Affairs (VA), VA loans are for eligible members of the U.S. military — active duty, veterans, National Guard and Reservists — as well as surviving spouses. VA loans typically don’t require a down payment, and they don’t require a minimum credit score or mortgage insurance, but you’ll need to pay a funding fee of 1.25 percent to 3.3 percent of the loan amount at closing.
• USDA loans: Guaranteed by the U.S. Department of Agriculture (USDA), USDA loans help moderate- to low-income borrowers buy homes in rural, USDA-eligible areas. These loans don’t have a credit score or down payment requirement, but they do charge guarantee fees.

Who are government-backed loans best for?

If your credit or down payment savings prevent you from qualifying for a conventional loan, an FHA loan can be an attractive alternative. Likewise, if you’re buying a home in a rural area or are eligible for a VA loan, these options might be easier to qualify for than a conventional loan.

4. Fixed-rate mortgage

Fixed-rate mortgages maintain the same interest rate over the life of your loan, which means the portion of your monthly mortgage payment covering your principal and interest always stays the same. Fixed-rate loans typically come in terms of 15 years or 30 years, although some lenders offer flexible term lengths.

Who are fixed-rate mortgages best for?

If you’re planning to stay in your home for some time and looking for a predictable monthly payment — notwithstanding homeowners insurance premium and property tax increases — a fixed-rate mortgage is right for you.

5. Adjustable-rate mortgage (ARM)

In contrast to fixed-rate loans, adjustable-rate mortgages (ARMs) come with interest rates that change over time. Typically, you’ll get a lower, fixed introductory rate for a set period. After this period, the rate increases or decreases at predetermined intervals for the remainder of the loan term. A 5/6 ARM, for example, has a fixed rate for the first five years, and then the rate increases or decreases based on economic conditions every six months until you pay it off. When your rate goes up, your monthly mortgage payment does as well, and vice versa.

Who are adjustable-rate mortgages best for?

If you don’t plan to stay in your home beyond a few years, an ARM could help you save on interest payments. However, it’s important to be comfortable with a certain level of risk that your payments might increase if you remain in the home and don’t refinance. If your job is stable and offers likely income growth, the savings you’ll get in the first few years of an ARM may be worth it.

Other types of home loans

In addition to these common kinds of mortgages, there are other types you might encounter when shopping around for a loan:

Construction loans

If you want to build a home, you can’t use a regular mortgage to finance it, as there’s nothing to back the loan yet. But you can take out a construction loan, especially a construction-to-permanent loan, which converts into a traditional mortgage once you actually move into the residence. 

Best for: Borrowers building their own homes who can afford a higher down payment. 

Interest-only mortgages

With an interest-only mortgage, the borrower makes interest-only payments for a set period — usually five or seven years — followed by payments that cover both principal and interest. 

Best for: Those who know they can sell or refinance during the interest-only period, or those who can reasonably expect to afford the higher monthly payment.

Piggyback loans

A piggyback loan, also referred to as an 80/10/10 loan, involves two loans: one for 80 percent of the home price, another for 10 percent. There’s a required down payment for the remaining 10 percent. These loans involve two sets of closing costs. 

Best for: Borrowers trying to avoid taking out a jumbo loan or paying mortgage insurance. 

Balloon mortgages

Balloon mortgages require a large payment at the end of the loan term. Generally, you make payments based on a 30-year term, but only for a short time, such as seven years. When the loan term ends, you make a large payment on the outstanding balance, which can be unmanageable if you’re not prepared. 

Best for: Real estate investors and flippers.

Portfolio loans

While most lenders sell the mortgages they offer to investors, some choose to keep them in their loan portfolio — “on the books,” so to speak. Because the lender holds onto these loans, they don’t have to adhere to FHFA or other standards and so might have more lenient qualifying requirements. However, they may also carry higher fees. 

Best for: Borrowers who’d struggle to qualify for a conventional or government-backed loan.

Home renovation loans

Home renovation loans combine the costs of purchasing and repairs into one mortgage.

Best for: Borrowers buying homes that need major work.

Physician loans

Physician loans allow doctors and other medical professionals to qualify for a mortgage even with large amounts of medical school debt. If you qualify for a physician loan, you typically won’t have to make a down payment or pay PMI, but you will face more restrictions than with a conventional loan — for example, you typically must buy a primary residence. Keep in mind that many physician loans are adjustable-rate loans.

Best for: Medical professionals buying primary residences.

Non-qualifying loans

Non-qualifying (non-QM) mortgages don’t meet certain standards set by federal law, so they offer more lenient credit and income requirements, but they might also come with higher down payments and interest rates.

Best for: Borrowers with unique circumstances, such as inconsistent earnings, foreign income or a declaration of bankruptcy.

Reverse mortgages

Reverse mortgages allow homeowners ages 62 and older to borrow against their own equity in a property, receiving tax-free payments from the lender. Repayment is not required until the property owner sells the home, moves permanently or dies, at which point proceeds from the home sale can be used to pay back the reverse mortgage loan.

Best for: Seniors who want to supplement their retirement incomes.

How to choose the right type of mortgage loan

Depending on your credit and finances, more than one type of mortgage could make sense for you. Likewise, you might be able to strike some loan types off your list immediately. You can’t get a VA loan, for example, if you or your spouse hasn’t served in the military.

As you think about which type of mortgage to get, consider:

• Your credit score: Can you qualify for a conventional loan, or is a government-backed loan a better fit?
• Your down payment: Do you need a low- or no-down payment loan? What about down payment assistance? Will you be using gift funds from family or friends? If you’re a first-time homebuyer or otherwise have limited funds for a down payment, consider government-backed loan options first.
• Your debt and income: After debt payments, is your monthly income sufficient to cover a mortgage? Be sure to factor in insurance, taxes and PMI, if your loan will require it.
• Your appetite for risk: Do you prefer a stable monthly payment? Would you be able to afford a higher monthly payment with an ARM? Many borrowers opt for a fixed-rate loan so their payments stay predictable.
• Your future plans: Do you plan to move in the short term? Would you want to pay off your mortgage sooner than 30 years? This might inform whether you get an ARM, an interest-only mortgage or some other option.

Once you’ve weighed these questions, compare mortgage lenders and start talking to loan officers. They can help you pinpoint the best fit and then how to get that mortgage.

Additional reporting by Mia Taylor