Mortgage Types & Features: A Complete Guide to Choosing the Right Home Loan

What Are Mortgage Types?

A mortgage type refers to the structure and program under which a home loan is issued. Different mortgage types are designed to serve different borrower profiles, financial situations, and risk tolerances.

The most common mortgage types include conventional loans, government-backed loans (such as FHA, VA, and USDA), and non-conforming loans like jumbo mortgages.

Conventional Mortgages

Conventional mortgages are the most common type of home loan and are not backed by the federal government. These loans typically require stronger credit and higher down payments compared to government-insured programs.

• Available with fixed or adjustable interest rates
• Often require private mortgage insurance (PMI) if down payment is under 20%
• Can be conforming or jumbo depending on loan size

If your down payment is less than 20%, PMI increases your monthly payment until your loan-to-value ratio improves. You can estimate this cost using the PMI calculator.

FHA Loans

FHA loans are insured by the Federal Housing Administration and are designed to make homeownership more accessible for borrowers with lower credit scores or limited savings.

• Lower minimum down payments
• More flexible credit requirements
• Require upfront and annual mortgage insurance premiums (MIP)

FHA mortgage insurance often lasts for the life of the loan, which can make FHA loans more expensive over time compared to conventional mortgages.

VA & USDA Loans

VA and USDA loans are government-backed programs designed for specific borrower groups.

VA Loans

VA loans are available to eligible veterans, active-duty service members, and some surviving spouses. These loans often require no down payment and do not charge PMI.

USDA Loans

USDA loans are designed for rural and suburban homebuyers who meet income and location requirements. Like VA loans, they may allow zero down payment but include guarantee fees.

Jumbo Mortgages

Jumbo mortgages exceed conforming loan limits set by the FHFA and are used to finance higher-priced homes.

• Higher credit score and income requirements
• Larger down payments often required
• Rates may be slightly higher than conforming loans

Fixed-Rate vs Adjustable-Rate Mortgages

One of the most important mortgage features is whether your interest rate is fixed or adjustable.

Fixed-Rate Mortgages

Fixed-rate mortgages keep the same interest rate and principal-and-interest payment for the entire loan term, offering long-term stability.

Adjustable-Rate Mortgages (ARM)

ARMs start with a lower introductory rate that adjusts periodically after the initial fixed period. These loans can be useful if you plan to sell or refinance before rates adjust.

You can compare ARM scenarios using the ARM vs fixed mortgage calculator.

Key Mortgage Features That Affect Your Payment

• Loan term length (10, 15, 20, or 30 years)
• Mortgage insurance requirements
• Interest-only payment options
• Balloon payment structures
• Extra payment flexibility

Features like loan term and payment structure can significantly change how much interest you pay over time. Explore these differences with the loan term calculators.

How to Choose the Right Mortgage

The best mortgage depends on your income, credit, down payment, and long-term plans. A loan with the lowest monthly payment isn’t always the least expensive over time.

• Use affordability tools to set a realistic budget
• Compare total interest, not just monthly payments
• Consider how long you plan to stay in the home

Start by estimating your budget with the mortgage affordability calculator.