Six loan types, six honest explainers.
Each loan type has its own structure, its own ideal borrower, and its own gotchas. Here's the breakdown, with links to the calculator and guide for each.
Conventional loans.
The default U.S. mortgage. Not government-insured. Follows Fannie Mae and Freddie Mac underwriting guidelines. Requires stronger credit (typically 620+) and uses private mortgage insurance (PMI) when the down payment is under 20%. PMI is removable; this is the structural advantage of Conventional over FHA. Down payment can be as low as 3% with strong credit, more typically 5–20%.
- Best for: 740+ FICO, 5%+ down, plans to stay 5+ years, or able to put 20% down.
- Calculator: FHA vs Conventional · PMI calculator
FHA loans.
Insured by the Federal Housing Administration. Designed for buyers with lower credit (580+ FICO with 3.5% down) or smaller down payments. Charges an upfront 1.75% mortgage insurance premium plus monthly MIP. Critically, monthly MIP lasts the life of the loan if down payment is under 10%; otherwise it drops at year 11. Many buyers use FHA to enter, then refinance to Conventional once equity allows.
- Best for: Sub-680 credit, 3.5% down minimum, planning to refinance to Conventional later.
- Calculator: FHA vs Conventional · Guide: FHA vs Conventional — the long version
VA loans.
Available to qualifying veterans, active-duty service members, and surviving spouses. Zero down payment required. No private mortgage insurance — ever. Charges a one-time funding fee (1.25%–3.3% of loan, depending on service category and down payment). The lack of PMI is the key advantage; over a long hold, VA is often cheaper than Conventional even with the funding fee.
- Best for: Eligible veterans/service members, especially with limited cash to close or planning long holds.
- Calculator: VA vs Conventional · Guide: VA loan guide
USDA loans.
For rural and some suburban areas designated by the USDA. Zero down payment. Income limits apply (typically 115% of area median income). Charges a 1% upfront guarantee fee and a 0.35% annual fee, both lower than FHA equivalents. Often the cheapest option for eligible buyers in eligible locations — but eligibility is narrow.
- Best for: Buyers in USDA-eligible zones with moderate income.
- Standalone calculator coming soon. Use the True Monthly Cost tool with manual fees in the meantime.
Jumbo loans.
Loans above the conforming loan limit (which varies by county, but generally above ~$766K). Underwriting is stricter — typically 700+ FICO, larger down payments (often 10–20%), and substantial cash reserves required. Rates can be slightly above or below conforming, depending on the lender and the borrower profile.
- Best for: High-cost markets, strong-credit borrowers with large down payments.
- Calculator: True Monthly Cost handles jumbo loans the same as conventional from a math perspective.
Adjustable-rate mortgages.
Fixed for an initial period (5, 7, or 10 years), then adjusts annually based on a benchmark index plus a margin. Rates during the fixed period are often lower than 30-year fixed rates. The trade-off: you carry the rate risk after the fixed period ends. Rational for buyers with a confirmed shorter hold — sale, refinance to fixed, or expected income jump that makes the reset manageable.
- Best for: Confirmed hold under the fixed period, or strong intention/ability to refinance before reset.
- Calculator: ARM vs Fixed · Guide: ARM vs Fixed — the long version
Run the loan-type comparison that matches your situation.
FHA vs Conventional handles the most common decision. VA vs Conventional applies if you qualify. ARM vs Fixed covers the rate-vs-stability trade.