Mortgage types explained

A mortgage is a long-term loan for a house, but the word 'mortgage' covers a bunch of very different products with different down payments, rate structures, and eligibility rules. Picking the right one can save tens of thousands over the life of the loan.

By loan source

• Conventional: the default — private loans that conform to Fannie Mae/Freddie Mac guidelines. Down payments from 3% (first-time buyer) to 20%. Best rates if you have good credit.
• FHA: government-insured loans for borrowers with lower credit or smaller down payments. 3.5% down. Requires mortgage insurance for the life of the loan (usually).
• VA: for military/veterans. Zero down, no PMI, usually lowest rates. Best deal in mortgages if you qualify.
• USDA: zero-down loans for homes in designated rural areas. Income-limited.
• Jumbo: loans above the conforming loan limit ($750k in most areas as of 2025). Usually require better credit and higher down payments.

By rate structure

• Fixed-rate (15, 20, 30 year): rate never changes. 30-year fixed is the American default. 15-year fixed has higher monthly payments but much lower total interest.
• Adjustable-rate mortgage (ARM): fixed for an initial period (5, 7, or 10 years), then adjusts annually based on an index. Lower initial rate, but real risk if you're still in the house when it adjusts.
• Interest-only: pay only interest for 5–10 years, then start paying principal. Niche product, usually a bad idea for most buyers.