There are five main types of mortgage loans you’ll run into as a first-time buyer: Conventional, FHA, VA, USDA, and Jumbo. If you’ve been following my “Real Estate Terms You Should Know” series, you’ve probably seen FHA and PMI pop up individually. But when you’re actually shopping for a mortgage, you need to see all your loan options side by side, not one term at a time. Here’s the full breakdown of what each one actually requires.
Conventional Loans
The most common loan type, not backed by the government. Many lenders now offer conventional loans with as little as 3% down for first-time buyers through programs like Fannie Mae HomeReady or Freddie Mac Home Possible, though the standard is closer to 5%. You’ll need solid credit to qualify for the best rates, and if you put down less than 20%, you’ll pay PMI (private mortgage insurance), which cancels automatically once you hit 22% equity, or you can request removal yourself at 20%.
Best for: buyers with good credit and at least a small down payment saved.
FHA Loans
Government-backed, designed to make homeownership more accessible. With a credit score of 580 or higher, you only need 3.5% down. Below 580, the minimum jumps to 10%. FHA loan limits for 2026 start at a floor of $541,287 in lower-cost areas and scale up to $1,249,125 in high-cost areas, based on your county. The tradeoff: FHA loans require MIP (mortgage insurance premium), which sticks around for the life of the loan if your down payment is under 10%.
Best for: buyers with lower credit scores or a smaller down payment.
VA Loans
Available to eligible veterans, active-duty service members, and some surviving spouses. VA loans require no down payment at all and don’t charge monthly mortgage insurance, a real advantage over conventional and FHA loans. If you have full entitlement, there’s no statutory cap on how much you can borrow, you’re not boxed into jumbo territory the way conventional or FHA borrowers are. There’s a tradeoff though: most borrowers pay a one-time VA funding fee (2.15% of the loan amount on a first-time purchase with 0% down, less with a down payment, and it can be rolled into the loan). Some borrowers, including those receiving VA disability compensation, are exempt.
Best for: anyone who qualifies through military service. If you’re eligible, this is usually the cheapest path to homeownership.
USDA Loans
Also zero down payment, but designed for lower-income buyers purchasing in eligible rural or suburban areas (more areas qualify than you’d think, it’s not just farmland). Income limits apply.
Best for: buyers open to eligible rural/suburban locations who meet the income requirements.
Jumbo Loans
For loan amounts above the conforming loan limit, the cap on what Fannie Mae and Freddie Mac will back. For 2026, that baseline limit is $832,750 in most of the country (up to $1,249,125 in high-cost areas). Anything above that in your county is jumbo territory. These typically require around 10-20% down and stronger credit, since the lender is taking on more risk with a larger loan.
Best for: buyers in higher-cost markets or purchasing above-average-priced homes.
Types of Mortgage Loans: Which One Is Right for You?
That depends on your credit score, how much you’ve saved, your income, and where you’re buying. Your credit score especially, since it’s one of the biggest factors in which loan types you’ll even qualify for and what rate you’ll get within them. Talking to more than one lender before you decide is worth the extra hour, since two lenders can quote different rates for the exact same loan type.
The bottom line
There’s no single “best” loan type, only the best type for your specific situation. Save this post so you have the full comparison handy when you start seriously shopping, and know your credit score before you talk to any lender, it changes which of these five loan types even makes sense for you.