Buying a home is an exciting milestone. It can also bring a lot of questions, especially when it is time to choose a mortgage.
There are several types of mortgage loans, and each one works a little differently. Some are designed for buyers with established credit and a larger down payment. Others may be useful for first-time buyers, eligible military borrowers, or people purchasing in certain rural areas. The right starting point can vary based on the property, income, credit history, down payment funds, and the amount you plan to borrow.
This guide gives a general overview of common mortgage loan types so you can feel more prepared before speaking with a mortgage loan officer.
Blog Summary
The most common types of mortgage loans include conventional mortgages, adjustable-rate mortgages, FHA mortgages, VA mortgages, and USDA mortgages. Each loan type has different features, borrower guidelines, property requirements, and possible costs.
In this blog, we’ll walk through how these mortgage types work, the pros and cons of each, what lenders may review, and how to start comparing home loan choices.
Table of Contents
- Quick Comparison of Common Types of Mortgage Loans
- Conventional Mortgages
- Adjustable-Rate Mortgages
- FHA Mortgages
- VA Mortgages
- USDA Mortgages
- Common Factors Lenders May Review
- How to Choose the Right Mortgage Loan
- Questions to Ask a Mortgage Loan Officer
- Explore Mortgage Choices With Call Federal
Quick Comparison of Common Types of Mortgage Loans
| Mortgage Type | Often Considered By | Key Feature | Important Consideration |
| Conventional Mortgage | Buyers with established credit and down payment funds | Broad use and fixed-rate choices | PMI may apply with a smaller down payment |
| Adjustable-Rate Mortgage | Buyers comparing lower starting payments | Rate may adjust after an initial period | Future payments can change |
| FHA Mortgage | Buyers with smaller down payments or developing credit | Government-backed structure | Mortgage insurance is required |
| VA Mortgage | Eligible service members, veterans, and certain surviving spouses | Military borrower benefits | VA eligibility is required |
| USDA Mortgage | Buyers purchasing in eligible rural or outlying areas | Rural homeownership focus | Income and property location guidelines apply |
Conventional Mortgages
A conventional mortgage is a home loan that is not insured or guaranteed by a government agency. It is one of the most common mortgage choices for homebuyers and may be used for a primary residence, second home, or investment property, depending on the loan program and lender guidelines.
Conventional mortgages are often available with fixed interest rates, which means the principal and interest portion of the monthly payment stays the same for the life of the loan. Some buyers choose conventional financing because it can offer a straightforward structure and a variety of loan terms.
Common Factors Lenders May Review
For a conventional mortgage, lenders may review:
- Credit history and credit score
- Income and employment
- Current debt
- Down payment funds
- Property type and use
- Appraisal results
- Cash reserves, in some cases
- Mortgage insurance requirements, if applicable
A larger down payment may reduce or remove the need for private mortgage insurance, also called PMI. However, down payment requirements can vary by program.
Pros of Conventional Mortgages
- Often available with fixed-rate terms
- Can be used for many property types
- May offer strong pricing for well-qualified borrowers
- PMI may be removable once enough equity is reached, based on program rules
- Good choice for buyers with established credit and steady income
Cons of Conventional Mortgages
- Credit guidelines may be stricter than some government-backed programs
- PMI may apply with a smaller down payment
- Buyers with lower credit scores may see higher costs
- Certain property types may have additional requirements
- A larger down payment may be needed for the best pricing
When a Conventional Mortgage May Make Sense
A conventional mortgage may be worth considering if you have established credit, reliable income, and funds set aside for a down payment and closing costs. It may also be a good path if you want a fixed-rate mortgage or are buying a property that does not qualify for certain government-backed programs.
Adjustable-Rate Mortgages
An adjustable-rate mortgage, often called an ARM, starts with an interest rate that stays fixed for an initial period. After that period ends, the rate can adjust based on the terms of the loan.
Because the rate may change later, ARMs can be more complex than fixed-rate mortgages. Buyers should review the initial rate period, adjustment schedule, rate caps, and possible future payment changes before choosing this type of mortgage.
Common Factors Lenders May Review
For an adjustable-rate mortgage, lenders may review:
- Credit history and credit score
- Income and employment
- Current debt
- Down payment funds
- Property type and use
- Ability to manage future payment changes
- ARM terms, including adjustment periods and rate caps
Pros of Adjustable-Rate Mortgages
- Initial rate may be lower than a comparable fixed-rate mortgage
- May lower the starting monthly payment
- Can work for buyers who do not plan to stay in the home long term
- Rate caps can limit how much the rate changes at certain times
- May offer another path for buyers comparing payment structures
Cons of Adjustable-Rate Mortgages
- Monthly payments may rise after the initial fixed period
- Long-term costs are less predictable than with a fixed-rate loan
- Refinancing later is not guaranteed
- Loan terms can be harder to compare
- Buyers need to be comfortable with possible rate changes
When an Adjustable-Rate Mortgage May Make Sense
An ARM may be worth discussing if you expect to sell the home before the first adjustment period or want to compare a lower starting rate against the predictability of a fixed-rate mortgage.
FHA Mortgages
An FHA mortgage is a government-backed loan insured by the Federal Housing Administration. FHA loans are often used by buyers who have a smaller down payment or a less established credit history.
FHA mortgages are not only for first-time buyers, though many first-time homebuyers consider them. If you’re preparing for your first purchase, Call Federal’s first-time homebuyer guide can give you a helpful overview before you apply.
Common Factors Lenders May Review
For an FHA mortgage, lenders may review:
- Credit history and credit score
- Income and employment
- Current debt
- Down payment funds
- Primary residence occupancy
- FHA loan limits
- FHA appraisal and property standards
- Mortgage insurance costs
Pros of FHA Mortgages
- May be accessible for buyers with a smaller down payment
- Credit guidelines may be more approachable for some borrowers
- Often considered by first-time homebuyers
- Gift funds or approved assistance may be allowed
- Can create a path to homeownership for buyers who may not meet conventional guidelines
Cons of FHA Mortgages
- Mortgage insurance is required
- Property must meet FHA standards
- Loan limits apply
- Total borrowing cost may be higher for some buyers
- Not every property will qualify
When an FHA Mortgage May Make Sense
An FHA mortgage may be worth considering if you have limited down payment funds, are still building credit, or want to compare a government-backed loan with conventional mortgage choices. It can also be a useful conversation point if you plan to use approved gift funds or assistance for upfront costs.
VA Mortgages
A VA mortgage is backed by the U.S. Department of Veterans Affairs and is available to eligible service members, veterans, and certain surviving spouses.
For those who qualify, a VA loan can be a valuable home financing choice. VA loans may reduce upfront costs and do not require private mortgage insurance. A VA funding fee may apply unless the borrower qualifies for an exemption.
Common Factors Lenders May Review
For a VA mortgage, lenders may review:
- Military service or qualifying status
- Certificate of Eligibility
- Income and employment
- Credit history
- Current debt
- Primary residence occupancy
- VA appraisal
- Funding fee status, if applicable
Pros of VA Mortgages
- Designed for eligible military borrowers
- May reduce upfront cash needed to purchase
- No private mortgage insurance
- Can offer strong value for qualified buyers
- May have more accessible credit guidelines than some conventional programs
Cons of VA Mortgages
- Only available to eligible borrowers
- Certificate of Eligibility is required
- VA funding fee may apply unless exempt
- Property must meet VA standards
- Some sellers may be less familiar with VA loan requirements
When a VA Mortgage May Make Sense
A VA mortgage may be worth discussing if you are an eligible service member, veteran, or qualifying surviving spouse. It can be especially useful for buyers who want to compare ways to reduce upfront costs and avoid private mortgage insurance.
USDA Mortgages
A USDA mortgage is designed for eligible buyers purchasing homes in qualifying rural or outlying areas. These loans are backed by the U.S. Department of Agriculture and are intended to expand access to homeownership in approved locations.
The word “rural” can cover more areas than many buyers expect. Some communities outside a city center may qualify, so property location is an important part of the review.
Common Factors Lenders May Review
For a USDA mortgage, lenders may review:
- Property location
- Household income
- Credit history
- Income and employment
- Current debt
- Primary residence occupancy
- USDA appraisal and property standards
- Program fees
Pros of USDA Mortgages
- May reduce upfront cash needed for eligible buyers
- Designed for qualifying rural and outlying communities
- Can be useful for buyers with limited savings
- Not limited only to first-time homebuyers
- Fixed-rate structures are commonly available through USDA programs
Cons of USDA Mortgages
- Property must be in an eligible area
- Household income guidelines apply
- Home must be used as a primary residence
- Program fees may apply
- Not every buyer or property will qualify
When a USDA Mortgage May Make Sense
A USDA mortgage may be worth discussing if you are buying outside a major city or in a qualifying rural area. It may also be useful if you want to compare mortgage options that may reduce the cash needed at closing.
Common Factors Lenders May Review
Mortgage requirements can vary by lender, program, property, and borrower qualifications. Even so, most lenders review several core areas before approving a home loan.
Credit History
Credit history gives lenders a sense of how you have managed borrowed money in the past. A stronger credit profile may open the door to more mortgage choices and better pricing.
If you are preparing to buy a home, it may be wise to review your credit report, avoid new debt when possible, and continue making payments on time.
Down Payment and Closing Costs
The down payment is the amount you contribute toward the purchase price of the home. Closing costs are separate expenses tied to finalizing the loan and purchase.
Some mortgage programs require more upfront cash than others. Buyers should also plan for inspections, moving costs, insurance, taxes, and early home maintenance.
Some programs, grants, or limited-time offers may reduce certain upfront costs for qualified buyers. Call Federal also offers mortgage savings information for borrowers who want to see what may be available today.
Income and Employment
Lenders review income to see how the mortgage payment would work alongside other monthly obligations. This may include wages, self-employment income, retirement income, or other eligible sources.
Stable, documented income can make the loan review smoother.
Debt-to-Income Ratio
Debt-to-income ratio compares monthly debt payments with monthly income. This gives lenders a way to evaluate how much room exists in the budget for a mortgage payment.
Existing auto loans, credit cards, student loans, and other debts can all play a role.
Property Type and Location
The property itself matters, too. Some mortgage programs have rules for property condition, location, occupancy, or use.
For example, a USDA loan requires an eligible location, and FHA or VA loans require program-specific appraisal standards. Conventional mortgages may have different rules for condos, second homes, investment properties, or multi-unit homes.
Loan Term
Mortgage terms can affect the monthly payment and total interest. A longer term may create a lower monthly payment, while a shorter term may reduce total interest paid across the life of the loan.
Call Federal offers several fixed-rate term choices, giving Richmond-area buyers a way to compare payment estimates before applying.
Mortgage Insurance and Program Fees
Some loans include mortgage insurance or program fees. These costs can affect the monthly payment, upfront expenses, or total borrowing cost.
Ask about any mortgage insurance, funding fee, guarantee fee, or program-specific cost before choosing a loan.
How to Choose the Right Mortgage Loan
Choosing between different types of mortgage loans is not only about the interest rate. The best starting point should reflect the home you want to buy, how much cash you have available, how steady you want the payment to be, and which programs are open to you.
Here are a few questions to consider before applying.
How much do you have available for upfront costs?
A larger down payment can change your loan choices and may reduce certain costs. A smaller down payment may make buying possible sooner, but it can also affect the monthly payment, mortgage insurance, and total cost.
Do you want a fixed payment structure?
If payment stability matters most, a fixed-rate mortgage may be appealing. If you are comfortable with future rate changes and do not plan to keep the loan long term, an ARM may be worth a conversation.
Are you eligible for a government-backed loan?
FHA, VA, and USDA loans each have unique borrower or property guidelines. If you are eligible, one of these programs may open a path that looks different from conventional financing.
Where is the home located?
Location can matter for certain loan programs. USDA loans focus on eligible rural and outlying areas, and local market conditions can also shape how quickly you may need a pre-approval letter when making an offer.
How long do you plan to stay in the home?
A buyer planning to stay for many years may value long-term payment stability. A buyer expecting a shorter stay may compare other structures, including ARMs, after reviewing the risks and possible payment changes.
What does the total cost look like?
A lower monthly payment is only one part of the decision. Review closing costs, mortgage insurance, program fees, interest over the life of the loan, and the effect of different loan terms.
Before you talk with a lender, reviewing common mortgage loan terms can make the conversation easier to follow.
Questions to Ask a Mortgage Loan Officer
Before choosing a mortgage, consider asking:
- Which types of mortgage loans may be available for my purchase?
- What upfront costs should I plan for?
- Would this loan include mortgage insurance or program fees?
- How would different loan terms change the monthly payment?
- Are there grant programs or down payment resources I should know about?
- Does the property type or location affect my choices?
- What documents should I gather before applying?
- How long does pre-approval last?
Explore Mortgage Choices With Call Federal
The different types of mortgage loans can feel easier to compare once you know what each one is designed to do. Conventional, ARM, FHA, VA, and USDA loans all serve different buyer scenarios, and the right choice starts with a conversation.
Call Federal Credit Union works with Richmond-area buyers to compare mortgage programs, estimate monthly payments, and start the online application process.