If you’re looking for the mortgage loan and you’re wondering which one is right for you, then read this article to get more useful tip.
Here are the major types of Mortgage loans to consider;
1. Conventional mortgages
Conventional mortgages are the most common type of mortgage. That said, conventional loans may have different requirements for a borrower’s minimum credit score and debt-to-income (DTI) ratio than other loan options. Generally, you can qualify for a conventional mortgage with a minimum credit score of 620 and a DTI of up to 50%.
Conventional loans are a good choice for most borrowers who want to take advantage of lower interest rates with a larger down payment.
Pros of conventional mortgages:
- The overall borrowing cost after fees and interest tends to be lower than other loan types.
- Your down payment can be as little as 3% – 5% for qualifying loans.
Cons of conventional mortgages:
- You have to pay PMI if the down payment is less than 20%.
- You’ll have to meet qualifications that may require a higher minimum credit score of 620 and lower DTI.
Home buyers who might benefit:
- Borrowers who can pay at least 3% – 5% down and have a minimum FICO® Score of 620 can typically benefit from conventional loans.
- Borrowers with a DTI of 50% or less can typically benefit from conventional loans.
2. Fixed-rate mortgages
A fixed-rate mortgage has the same interest rate and principal/interest payment throughout the duration of the loan. The amount you pay per month may fluctuate due to changes in property tax and insurance rates, but for the most part, fixed-rate mortgages offer you a very predictable monthly payment.
Pros of fixed-rate mortgages:
- Monthly principal and interest payments don’t change over the life of your loan, making it easier to plan a budget.
- Your loan can fully amortize over the term of the mortgage.
Cons of fixed-rate mortgages:
- You’ll pay a higher rate than the introductory rate you could get on an adjustable-rate mortgage.
- You may end up paying more in interest over time if the rates are high.
Home buyers who might benefit:
- Fixed-rate loans are great for buyers who don’t want to have to worry about their monthly principal and interest payments changing down the road.
- Buyers who are purchasing or refinancing their forever home and don’t plan on moving anytime soon can benefit from these loans.
3. Adjustable-rate mortgages
The opposite of a fixed-rate mortgage is an adjustable-rate mortgage (ARM). ARMs are 30-year loans with interest rates that change depending on how market rates move.
You first agree to an introductory period of fixed interest when you sign onto an ARM. Your introductory period is typically 5, 7 or 10 years. If you sign on for a 5/1 ARM loan, for example, you’ll have a fixed interest rate for the first 5 years. During this introductory period, you pay a fixed interest rate that’s usually lower than 30-year fixed rates.
After your introductory period ends, your interest rate changes depending on market interest rates. Your lender will look at a predetermined index to calculate how rates are changing. Your rate will go up if the index’s market rates go up. If they go down, your rate goes down.
Pros of adjustable-rate mortgages:
- They offer lower interest rates for the initial introductory period.
- The initial low monthly payments allow for a more flexible budget and the opportunity to build up savings.
Cons of adjustable-rate mortgages:
- If the rate increases, it can dramatically increase your monthly payments once your introductory period is over.
- It’s more difficult to predict your financial standing if interest rates and mortgage payments fluctuate.
Home buyers who might benefit:
- Those who want a lower introductory rate while purchasing a starter home might benefit from an ARM.
- Those who don’t expect to live in their home for the full term of the loan could benefit from an ARM.
4. Government-backed loans
Government-backed loans are insured by government agencies, such as the Federal Housing Administration (FHA), Veterans Affairs (VA) or the United States Department of Agriculture (USDA). When lenders talk about government-backed loans, they’re referring to three types of loans: FHA, VA and USDA loans. Government-backed loans may offer more options for qualification.
Pros of government-backed loans:
- It’s possible to save on interest and down payments, which could mean reduced closing costs.
- These loans may offer wider qualification opportunities for borrowers.
Cons of government-backed loans:
- You must meet specific criteria to qualify.
- Many types of government-backed loans have insurance premiums (also called funding fees) that are required upfront, which can result in higher borrowing costs.
Home buyers who might benefit:
- Those who have low cash savings might benefit from a government-backed loan.
- Those with lower credit could benefit from a government-backed loan.
5. Jumbo loans
A jumbo loan is one that’s worth more than conforming loan standards in your area. You usually need a jumbo loan if you want to buy a high-value property. For example, you can get up to $2 million in a jumbo loan if you choose Rocket Mortgage. The conforming loan limit in most parts of the country is $806,500 in 2025.
Jumbo loan interest rates are usually similar to conforming 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.
Pros of jumbo loans:
- Their interest rates are similar to conforming loan interest rates.
- You can borrow more for a more expensive home.
Cons of jumbo loans:
- Qualification for a jumbo loan typically requires a credit score of 700 or higher, more money for a down payment and/or cash reserves and a lower DTI ratio than other loan options.
- You’ll need a large down payment, typically between 10% – 20%.
Home buyers who might benefit:
- Those who need a loan larger than $806,500 for a high-end home, have a good credit score and low DTI.