There are lots of mortgage options for homebuyers to pick from. This article breaks down each one to help you determine what's best for you.

What Types Of Mortgages Are There?

As if hunting for a new home isn’t stressful enough, you’ll also have to find a mortgage to help pay for it. Just like houses, mortgages come in all shapes and sizes. The good news is that means there are loan options for all types of borrowers. It’s important to understand the various options and the different factors of each of the types of mortgages and their potential advantages and disadvantages before deciding which one is best for you.

There are five primary types of mortgage loans. Here’s a brief overview of each one and which option might be best for the type of borrower you are, with more detailed descriptions that follow:

A Closer Look At The Types Of Mortgages

With a variety of possible loan options available, there’s a better chance of finding the right loan for your needs and your financial situation. Here’s a more in-depth look at the five most common types of mortgage loans.

Conventional Mortgages

Conventional loans are the most common type of mortgage and are available through private lenders, such as banks, credit unions, and mortgage companies (like Union Home Mortgage). They are not part of a specific government-backed program, such as FHA, USDA or VA loans.

Because conventional mortgages are not insured or backed by the government, they typically have stricter lending requirements (credit score of at least 620 and debt-to-income (DTI) ratio of up to 50%). They are available with either a fixed or adjustable interest rate.

Conventional loans can be broadly categorized as one of two types: conforming or non-conforming loans.

Conforming mortgages meet certain income and down payment requirements set by Fannie Mae or Freddie Mac, two government-sponsored entities that purchase loans from private lenders. Fannie and Freddie purchase loans so private lenders have funds to be able to make more home loans. All conforming loans are conventional. Not all conventional loans qualify as conforming.

Loans outside of these by Fannie Mae or Freddie Mac standards are considered non-conforming. The most common non-conforming loan is a jumbo mortgage, which is a loan that exceeds the dollar value limits of the Federal Housing Finance Agency (FHFA).

Fixed-Rate Mortgage

A fixed-rate mortgage is pretty straightforward because it has the same interest rate for the entire life of the loan. Your monthly mortgage payment – loan principal and interest – will remain consistent, allowing you to budget effectively without worrying about fluctuating mortgage payments. The amount paid in property tax and homeowners insurance rates could change, but the principal and interest payments won’t.

Fixed-rate loans typically have terms of 15 or 30 years, which makes them a popular option for people who plan to stay in their home over the long term. Fixed-rate mortgages are a category that can include conventional mortgages, jumbo loans and government-backed loans.

Adjustable-Rate Mortgage

Unlike fixed-rate loans, the interest rate of an adjustable-rate mortgage (ARM) changes over time based on market rates following an introductory period. Typically, the introductory period is for 5, 7 or 10 years with an interest rate that is lower than with a 30-year fixed-rate mortgage. The rate stays the same for this initial period. After that, the interest rate could move up or down based on market conditions, which means monthly mortgage payments could also increase or decrease for the rest of the life of the loan. Adjustable-rate mortgages can include conventional, government and jumbo loans.

For example, a 5/1 ARM loan means you would pay a fixed interest rate for the first five years and then the interest rate would adjust up or down each year (that’s the 1 in the 5/1). ARMs tend to be more popular when interest rates are higher. They also could be a good option for people who don’t plan on living in the same home for a long period.

Jumbo Loans

Jumbo loans are appropriately named because they’re bigger. They’re a type of non-conforming conventional mortgage that allows you to purchase a more expensive property. As mentioned previously, jumbo loans are considered non-conforming because they are outside of Fannie Mae or Freddie Mac conventional standards. That means they can’t be purchased by these enterprises and can present more risk.

The conforming loan limit is set each year by the Federal Housing Finance Agency (FHFA). In 2025, the baseline limit is $806,500 for single-family homes. In high-cost areas, limits can reach up to $1,209,750 for single-family properties. Jumbo loans are an option to borrow more than these conforming loan limits. Jumbo loans are available as both fixed-rate and adjustable-rate mortgages.

Government-Backed Loan

To make homeownership more accessible and affordable and encourage approved lenders to offer mortgages to people who might otherwise have trouble qualifying, there are three agencies that guarantee government-backed loans. The Federal Housing Administration (FHA) insures FHA loans, U.S. Department of Veterans Affairs (VA) insures VA loans and the United States Department of Agriculture (USDA) insures USDA loans.

Government-backed loans may offer more options for qualification for anyone with lower credit scores and limited savings for a down payment. If you do qualify for one of the loan types below, you could save on interest, fees, and down payment requirements.

FHA Loans

FHA loans are insured by the Federal Housing Administration (FHA) and available with as little as 3.5% required for a down payment if you have a credit score of at least 580 or a score as low as 500 with 10% down. All FHA loans require you to pay mortgage insurance in the form of a mortgage insurance premium (MIP), regardless of the amount of the down payment. These premiums help the FHA insure lenders against borrowers who default. With low down payment, fixed-rate and adjustable-rate mortgage options, an FHA loan could be the right choice for first-time homebuyers, students, recent graduates, newlyweds, or those with credit scores impacted by bankruptcy, foreclosure, or the impact of a divorce.

VA Loans

VA loans are insured by the Department of Veterans Affairs for eligible members of the U.S. military (active duty, veterans, National Guard and Reservists), as well as surviving spouses. VA loans may not require a down payment or private mortgage insurance and have additional features that can make buying a home more affordable for military families. There could be a funding fee ranging from 1.25 percent to 3.3 percent due at closing.

USDA Loans

USDA loans help moderate- to low-income borrowers buy homes in a USDA-eligible suburban or rural area. USDA loans have lower mortgage insurance requirements than FHA loans and can allow you to buy a home with no money down.

Find The Best Type of Mortgage

Choosing the right type of mortgage loan starts with knowing what options are available to you. Contact us today and we’ll help you make more sense of all the types of mortgages that could help you on your home buying journey.

The information provided here is for informational purposes. When interest rates and loan program information are included, it is for illustration purposes only and not a solicitation or quote for services. This is not an advertisement or loan estimate. Current interest rates, loan programs and qualification criteria can change at any time. If you have questions or need assistance, we can be reached using the contact information above.