Buying a home is exciting, especially if it’s your first. It can also be confusing when it comes to all the financing and mortgage loan options available. 

Many types of mortgage loans exist: conventional loans, FHA loans, VA loans, fixed-rate loans, adjustable-rate mortgages, jumbo loans, and more. Each mortgage loan may require certain down payments or specify standards for loan amount, mortgage insurance, and interest.  

Where you live, how long you plan to stay put, and other variables can make certain mortgage loans better suited to a home buyer’s circumstances and loan amount. Choosing wisely between them could save you a bundle on your down payment, fees, and interest.

In this article, we’ll discuss six of the most common types of mortgage loans for first-time buyers to help you figure out which is best for you.

What are Conventional Loans?

A conventional loan is considered the most common type of mortgage loan. They are not secured by an established government program like the Federal Housing Administration (FHA), Department of Agriculture (USDA) or Department of Veterans’ Affairs (VA). Instead, they’re offered by private lenders and will generally follow more strict requirements on your credit score and your debt-to-income (DTI) ratio.

Conventional loans are also known as conforming loans because they “conform” to the rules set forth by Fannie Mae and Freddie Mac, the two largest investors of conventional loans. They’re ideal for borrowers who already have excellent credit.

Some quick facts about conventional loans:

  • You’ll need a minimum of 620 credit score to qualify
  • Down payments can be as little as 3%
  • You can skip private mortgage insurance (PMI) if your down payment is at least 20%

There are two basic types of conventional loans: fixed-rate mortgages and adjustable rate mortgages.

Fixed-Rate Mortgage Loans

A fixed-rate mortgage has the same interest rate and principal/interest payment throughout the duration of the loan. They are offered as 10, 15, or 30-year options.


Those with a steady income, who don’t have other significant debts are the best candidates for a 10-year, fixed rate loan. Since the loan amount is shorter, the monthly payment is often higher, but to compensate, these loans are offered at competitive mortgage interest rates.


People who anticipate an increase in income and a decrease in debt in the future are decent candidates for a 15-year mortgage. Again, since the loan term is shorter, the monthly payment will be higher than it would be with a 30-year option.


Most mortgage loans have a 30-year loan term. If buying a home is a stretch or you otherwise want to keep your monthly payment as low as possible, you should seriously consider this loan term.

Adjustable-Rate (ARM) Mortgage Loans

An adjustable-rate mortgage (ARM) has an interest rate that varies throughout the life of the loan. Most ARMs have two periods: fixed and adjustable.

During the first period, your interest rate is fixed and won’t change. During the second period, your rate goes up and down regularly based on market changes. Most ARMs have a 30-year loan term.

What are Unconventional Loans?

As stated before, conventional loans require a higher credit score, lower debt-to-income ratio and larger cash down payment. Sometimes, this won’t fit a borrower’s needs. That is where an unconventional loan comes into play.

In reference to its name, unconventional loans are different from most loans. They’re backed by the government or secured through a bank or private lender, making them ideal for individuals with a lower income or less than perfect credit. The only downside comes from the fact that the loan limit is lower, and if you are seeking a home with a high price tag, you will need a larger down payment.


FHA loans are insured by the Federal Housing Administration and require a small down payment. While typical home loans require a down payment of 20% of the purchase price of your home, with an FHA loan, you can put down as little as 3.5%.


VA loans are backed by the Department of Veterans Affairs. If you’ve served in the United States military, a Veterans Affairs or VA loan can be an excellent alternative to a conventional loan. If you qualify for a VA loan, you can score a sweet home with no down payment and no mortgage insurance requirements. 

Keep in mind that veterans and active duty personnel who secure a VA loan do need to certify that they intend to personally occupy the property as a primary residence.


USDA loans are insured by the United States Department of Agriculture. USDA loans have lower mortgage insurance requirements than FHA loans and can allow you to buy a home with no money down. You must meet income requirements and buy a home in a suburban or rural area in order to qualify for a USDA loan.


A jumbo loan is one that’s worth more than conventional or conforming loan standards in your area. You usually need a jumbo loan if you want to buy a high-value property. 

Jumbo loan interest rates are usually similar to conventional interest rates, but they’re more difficult to qualify for than other types of loans. You’ll need to have a higher credit score and a lower DTI to qualify for a jumbo loan.

Now that we’ve covered the basic types of loans, it’s a good idea to use a mortgage calculator to estimate your monthly mortgage payment. You’ll also want to know your credit score. There are quite a few myths about credit score but don’t let that deter you. 

Ultimately, the best type of mortgage loan depends on your individual preferences and situation. If you still have questions about which mortgage loan is right for you, then contact aDoor Real Estate today. Our experienced agents are available to answer your questions!