Choosing the Right Kind of Loan
Today there are so many types of loans on the market that it is beyond the scope of this page to list or explain them all. Your lender is the best person to help you understand and select a loan program to suit your needs. Below is a summary of the three most popular loan types.
Loan Types
Conventional Loans
A conventional mortgage loan is offered by private lenders like mortgage companies, banks, and credit unions. They follow the lending rules set by Fannie Mae and Freddie Mac. For 2026, conventional loans up to $836,750 are considered Conforming Loans. A Conventional mortgage is not backed by the federal government.
Jumbo Loans
Also in the conventional loan category, a loan amount in excess of $836,750 is considered a Jumbo or non-conforming loan. These loans might have more stringent down payment and documentation requirements compared to conforming loan amounts. These are not backed by Fannie Mae or Freddie Mac or the Federal government.
Government Loans
- FHA loans are backed by the Federal Housing Administration and might be a good option for those with a low down payment, lower credit score, or past credit delinquencies such as bankruptcy or foreclosure. FHA loans come have monthly mortgage insurance premiums (MIP) which is an extra cost that remains for the loan’s lifetime unless refinanced. They also have upfront mortgage insurance that can be rolled into the loan amount.
- VA loans are backed by the US Department of Veteran Affairs (VA) and are only available to eligible veterans, active-duty service members, and surviving spouses. These offer as little as 0 down payment and no monthly mortgage insurance, though, they do come with an upfront funding fee that can be rolled into the loan amount.
- USDA loans are available for low to middle income homebuyers in certain rural areas. These loans also might not require a down payment.
Non-QM Loans
A non-QM loan is a type of mortgage loan that does not meet the criteria for a qualified mortgage (QM) as set forth by the Consumer Financial Protection Bureau (CFPB).Non-QM loansare not subject to the same standards and regulations as qualified loans. Some examples of Non-QM Loans include Debt Service Coverage Ration (DSCR) loans, Bank Statement Loans, and Asset Related Loans.
Renovation Loans
Offered via FHA, VA, as well as Conventional Loans, renovation loans allow a borrower to finance a property in less than ideal condition and build the cost of renovations into the loan amount, thereby making the improvements immediately following the closing.
Loan Structures
Fixed Rate Loan:
A fixed rate loan assures your interest rate and monthly principal and interest payments will stay the same over the life of the loan. Fixed rate loans typically come in fixed periods and amortizations of 10, 15, 20 and 30 years.
ARMs (Adjustable Rate Mortgage):
ARM’s can offer fixed interest rates for the first 5, 7 or 10 years after which the interest rate adjusts with the market every 6 months or year thereafter. The starting interest rate may be lower than a fixed rate loan’s rate, saving you money initially. However, it is important to understand risks of ARM loans and their structure including the margin, index, and the adjustment caps that determine the adjustment after the 5th, 7th, or 10th year.
