Mortgage Loan Types cost guide.
Choosing a mortgage loan type affects your down payment requirement, ongoing insurance costs, and eligibility rules. This guide compares the most common loan type decisions and their illustrative cost implications.
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Key cost factors.
- Credit score and debt-to-income ratio
- Military service history or eligibility for special loan programs
- Down payment savings available
- Property location and whether it qualifies for certain loan programs
Mortgage Loan Types comparisons.
Conventional Loan vs. FHA Loan
Conventional loans aren't backed by a government agency and typically require stronger credit, while FHA loans are government-insured and allow lower credit scores and down payments in exchange for mandatory mortgage insurance.
VA Loan vs. Conventional Loan
VA loans are available to eligible veterans, service members, and some surviving spouses, offering notable benefits like no required down payment, in exchange for a funding fee and specific eligibility rules.
USDA Loan vs. FHA Loan
USDA loans support homeownership in eligible rural and some suburban areas with no down payment requirement, while FHA loans are available more broadly but require a minimum down payment.
Jumbo Loan vs. Conforming Loan
Conforming loans fall within standard loan limits and are generally easier to qualify for, while jumbo loans exceed those limits and typically come with stricter underwriting requirements.
Fixed-Rate vs. Adjustable-Rate Mortgage (ARM)
A fixed-rate mortgage locks in the same interest rate for the life of the loan, while an adjustable-rate mortgage (ARM) typically starts with a lower rate for an initial period before adjusting periodically based on market conditions.
Interest-Only Loan vs. Traditional Amortizing Loan
An interest-only loan lets borrowers pay only interest for an initial period, keeping payments lower upfront but not building equity through principal paydown during that time, unlike a traditional amortizing loan.
15-Year vs. 30-Year Mortgage
A 15-year mortgage pays off the loan faster with a higher monthly payment and less total interest, while a 30-year mortgage spreads payments out for a lower monthly cost but more interest paid over the loan's life.
Piggyback Loan (80-10-10) vs. Paying Private Mortgage Insurance
Buyers with less than 20% down on a conventional loan can either pay private mortgage insurance (PMI) or use a piggyback second loan to avoid it, splitting financing between a first and second mortgage.
Balloon Mortgage vs. Traditional Fixed-Rate Mortgage
A balloon mortgage offers lower payments for a short initial term before requiring a large lump-sum payoff, while a traditional fixed-rate mortgage spreads payments evenly across the full loan term.
Assumable Mortgage vs. New Mortgage
Some loans, notably certain government-backed loans, can be assumable — meaning a qualified buyer takes over the seller's existing loan, including its interest rate, rather than originating a brand-new mortgage.
Before you hire or buy.
- Which loan types am I actually eligible for?
- What mortgage insurance, if any, applies to each option?
- How does each loan type affect my monthly payment and long-term cost?
Mortgage Loan Types questions, answered.
Does a lower down payment always mean a worse loan?
Not necessarily — some low- or no-down-payment loan programs exist specifically to expand access to homeownership, though they often come with added insurance costs or eligibility requirements to weigh against a larger down payment option.
Can loan type affect my interest rate?
Yes — different loan types and programs can carry different rate structures and pricing adjustments, so it's worth comparing actual quotes across eligible loan types rather than assuming one is always cheaper.
Figures on this page are illustrative examples for general education, not quotes or guarantees of actual pricing. Actual costs vary by provider, location, and specific project scope — always get a specific quote before making a purchasing decision.
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