A loan on the house you sleep in is priced differently from a loan on a house someone else rents from you. That single fact drives more of the primary residence mortgage types conversation than most buyers expect. Before a lender looks at your down payment, it checks whether you plan to live there, and that answer reshapes the rate, the minimum down payment, and which programs you are allowed to use at all.
Here is how the options break down, what each one costs in practice, and where buyers usually go wrong.
Why occupancy status changes the whole picture
Owner-occupants default less often than investors. Lenders know it and price accordingly. On a conventional loan, an investment property often carries a rate 0.75 to 2.875 percentage points above a primary residence. A second home lands somewhere in between. On a $400,000 loan, that gap can mean $200 to $700 extra in interest every month.
The trade-off is a commitment. You generally have to move in within 60 days of closing and stay at least 12 months. FHA, VA, and USDA loans require the property to be your primary residence, full stop, with narrow exceptions such as a job transfer or a documented relocation. If the plan is to buy now and rent it out next spring, most of the programs below are unavailable to you, and claiming otherwise on the paperwork is occupancy fraud.
The main primary residence mortgage types
Six categories cover nearly every owner-occupied purchase in the US. The pricing differences between them are smaller than people assume. The bigger gaps show up in mortgage insurance, upfront fees, and how long you are stuck with both. There is a deeper breakdown of what each mortgage type really costs you if you want the full math; here is the working overview.
Conventional conforming loans
These are not backed by a government agency. They get sold to Fannie Mae or Freddie Mac, which means the loan amount must stay under the conforming limit, roughly $806,000 in most of the country for 2025 and higher in expensive counties around Los Angeles, Seattle, or the New York metro. Down payment runs as low as 3% for qualifying first-time buyers and 5% for everyone else, with a credit score floor near 620.
Private mortgage insurance applies below 20% down. It cancels automatically once you reach 78% of the original value and can usually be removed earlier on request at 80%.
FHA loans
3.5% down with a 580 score, or 10% down if your score falls between 500 and 579. HUD insures the loan, so credit and debt-to-income rules are looser than conventional. Mortgage insurance is the catch: 1.75% upfront plus annual premiums. Put down less than 10% and that annual premium stays for the life of the loan. Refinancing into a conventional loan later is how most borrowers escape it.
VA loans
Available to eligible service members, veterans, and some surviving spouses. Zero down, no monthly mortgage insurance, and a funding fee of 2.15% on first use with nothing down, waived entirely for veterans with a service-connected disability. Sellers can cover closing costs, which is rare elsewhere. The VA does not lend to you directly; a private lender originates the loan with a VA guaranty behind it.
USDA loans
Zero down, but restricted to eligible rural areas and capped at 115% of the area median income. There is an upfront guarantee fee and a modest annual fee, both cheaper than FHA’s. The eligibility map catches more addresses than people assume, including plenty of small towns within commuting distance of a mid-sized city. Our guide to mortgage options for rural home buyers covers where USDA beats FHA and where it does not.
Jumbo loans
Anything above the conforming limit. No government backing, so underwriting tightens considerably: expect 10% to 20% down, scores of 700 or better, six to twelve months of cash reserves, and occasionally a second appraisal. Rates sometimes match conforming loans and sometimes sit a half point higher, depending on how the lender is managing its balance sheet that quarter.
The line between conventional and government-backed loans matters more than the marketing suggests, because the two categories diverge on insurance, appraisal rules, and how quickly you can drop costs later. That split is explained well in this comparison of conventional versus government-backed mortgages.
Fixed or adjustable, and the term question
Program type is only half the decision. Structure matters just as much.
A 30-year fixed is the default for good reason: the payment never moves. A 15-year fixed typically shaves 0.5 to 0.75 percentage points off the rate and eliminates decades of interest, but the monthly payment can jump 40% or more. Twenty-year and 25-year terms sit between the two and are worth asking about, since not every lender advertises them.
Adjustable-rate loans come in 5/1, 7/1, and 10/1 shapes. The first number is how many years the initial rate holds; after that it adjusts annually. Caps usually limit each adjustment to 2 points and the lifetime increase to 5 above the starting rate. An ARM makes sense if you expect to sell or refinance before the fixed period ends, and it is a gamble if you do not.
Programs that stack on top
Once you pick a category, several add-ons can change the numbers substantially:
- HomeReady and Home Possible: 3% down conventional loans with reduced mortgage insurance, limited to buyers earning up to 80% of the area median income.
- Down payment assistance: second liens or grants from state housing finance agencies, often 3% to 5% of the purchase price, frequently forgivable after five to ten years of occupancy.
- FHA 203(k): folds renovation costs into the loan, useful for houses that need a kitchen or a roof before they are livable.
- Seller-funded buydowns: a 2-1 buydown lowers your rate by 2 points in year one and 1 point in year two, paid by the seller or builder.
How to narrow it down without wasting a month
Start with three numbers: your middle credit score, the cash you can put toward closing, and the loan amount you actually need.
Score above 640 with 5% down? Conventional usually wins on total cost, because the mortgage insurance falls off. Score between 580 and 639 with a thin down payment? FHA is built for that profile. Served in the military? Run the VA numbers first before anyone talks you out of them. Buying outside a metro area? Check the USDA map. Need to borrow above the conforming limit? Jumbo, and start gathering reserve statements early.
If you are still torn between two options, this practical approach to answering what type of mortgage you should get walks through the decision in order rather than all at once.
Budget for closing costs separately. They typically run 2% to 6% of the purchase price, and they are not part of your down payment. On a $350,000 house that is $7,000 to $21,000 before you have made a single principal payment.
What to ask before you lock
Get Loan Estimates from at least three lenders on the same day so the rate environment is identical across quotes. Then compare page 1 line by line, not the headline rate, because origination charges vary by thousands of dollars between lenders quoting the same APR.
Ask specifically about mortgage insurance cancellation. Ask whether the loan will be serviced in-house or transferred. Ask if the lender offers a float-down option and what it costs. Ask what happens to your payment if taxes and insurance rise, since escrow shortages surprise plenty of new owners in year two.
And think one step past closing. The loan you choose now determines your refinance options later, which is why the gap between a purchase mortgage and a refinance is worth understanding before you sign rather than after. A 30-year FHA loan with permanent mortgage insurance is a very different starting position from a conventional loan you can restructure in three years. Pick the exit ramp while you are still choosing the entrance.