A $380,000 house, 10% down. That was the situation a friend brought to me last spring, and the first question her loan officer asked had nothing to do with her income or her credit score. It was: “What kind of loan are you thinking?” She didn’t know there was more than one answer.
There are dozens of mortgage products in the US market, and the one you pick sets your down payment, your monthly payment, your closing costs, and how much house you can realistically afford. Choosing badly can cost five figures over the life of the loan. Here’s how the main types of mortgage loans break down, and who each one actually suits.
Fixed-Rate Mortgages: The Default for Good Reason
A fixed-rate mortgage locks your interest rate for the full term. The payment in year one is the payment in year thirty. That predictability is why roughly 90% of buyers never even shop the alternatives.
The 30-year fixed is the standard. Borrow $340,000 at 6.5% and you pay about $2,149 a month in principal and interest, with total interest near $433,000 across the life of the loan. That number makes people flinch, but it buys the lowest possible monthly payment.
The 15-year fixed usually comes with a rate half a point to three-quarters of a point lower. The same $340,000 at 5.9% costs about $2,851 a month and total interest drops to roughly $173,000. You need $700 more in monthly cash flow, and you save a quarter of a million dollars. Worth it, if the budget stretches that far.
Adjustable-Rate Mortgages: Cheap Now, Uncertain Later
An ARM starts with a fixed rate for a set period, then adjusts on a schedule. A 5/1 ARM holds steady for five years and then moves every year after that. The hook is the starting rate, maybe 5.75% when the 30-year fixed sits at 6.5%.
On that same $340,000 loan the ARM payment begins around $1,984 instead of $2,149. That’s roughly $165 a month, or close to $10,000 over the initial fixed window. If you plan to sell or refinance inside five years, the savings are real and the risk is contained.
Year six is where it bites. Say the balance has dropped to $314,000 and the rate resets to 8%. Your payment climbs to about $2,425, a $440 jump in twelve months. Caps limit how fast the rate rises, not how high it eventually lands. ARMs work well when you have a concrete exit plan and poorly when you’re buying the house you intend to stay in forever.
Government-Backed Loans: FHA, VA, and USDA
Three federal programs exist to make borrowing easier for specific groups. None of them is free money, and none is automatically cheaper, but each solves a problem a conventional loan can’t.
FHA Loans
Backed by the Federal Housing Administration, these allow 3.5% down with a credit score as low as 580, or 10% down with a score between 500 and 579. That flexibility explains why FHA loans dominate among buyers with thin or bruised credit files.
The catch is mortgage insurance. You pay 1.75% of the loan amount upfront plus 0.55% annually, which on a $340,000 loan runs about $156 a month. Put less than 10% down and that premium stays for the life of the loan. If you want the timelines and the paperwork, here’s a full walkthrough on how to get an FHA mortgage in 2026.
VA Loans
Available to veterans, active-duty service members, and some surviving spouses, VA loans require no down payment and no monthly mortgage insurance. Rates typically run a quarter to half a point below conventional. You pay a funding fee of 2.15% on first use, or 3.3% if you’ve used the benefit before, and it can usually be financed. On a $380,000 purchase that’s about $8,000 rolled into the loan rather than handed over at closing.
USDA Loans
The USDA backs zero-down loans for homes in eligible rural and small-town areas, with income limits that generally cap at 115% of the area median. Fees are a 1% upfront guarantee charge and 0.35% annually, both well below FHA’s. The eligibility map catches more addresses than people expect, including plenty of suburbs hugging the edge of metro areas. The USDA mortgage process runs through an approved lender just like any other loan.
Conventional Loans: Conforming and Jumbo
Conventional loans carry no government guarantee. They’re sold to Fannie Mae and Freddie Mac, which is why they follow those agencies’ rules rather than a federal program’s.
A conforming loan fits under the limit the FHFA sets each year. For 2026 that’s $832,750 for a single-family home in most markets, higher in expensive counties. Put 20% down and you skip private mortgage insurance entirely. Put less down and PMI applies until you reach 20% equity, at which point you can request removal. First-time buyers can go as low as 3% down through HomeReady and Home Possible with a 620 score. The steps from pay stub to closing table are mostly about documentation once your score clears that bar.
Jumbo loans exceed the conforming limit, and lenders carry more risk on them, so the bar rises: usually 700+ credit, 10% to 20% down, and reserves covering six to twelve months of payments. The rate premium that used to come with jumbo has largely vanished, though the underwriting hasn’t. If your price point pushes you over the line, this jumbo mortgage playbook sets out exactly what underwriters look for.
Down Payments at a Glance
Down payment is the fastest way to narrow the field. Here’s where each product generally lands:
- VA and USDA: 0% down
- Conventional first-time buyer programs: 3% down with a 620 score
- FHA: 3.5% down at 580+, or 10% at 500–579
- Standard conventional: 5% to 20%, with PMI below 20%
- Jumbo: typically 10% to 20%
- Investment property: 15% to 25%, plus a rate premium
On a $380,000 purchase, 3.5% is $13,300 and 20% is $76,000. That gap is often the deciding factor, not the interest rate. If you’re buying your first place and want the order of operations laid out clearly, there’s a first-time home buyer mortgage playbook that maps seven steps with real numbers attached.
Specialty Loans Worth Knowing About
Interest-only loans let you pay nothing but interest for five to ten years. Payments start low, you build no equity, and the number resets sharply afterward. They’re mostly an investor tool.
Balloon mortgages run for a short term, often seven years, with the full balance due at the end. Rare outside seller financing, and painful if you can’t refinance when it comes due.
Bridge loans fund a new purchase while your current home sits on the market. Expect rates two to four points above a standard mortgage and a term under twelve months.
Construction-to-permanent loans cover the build and convert into a regular mortgage at completion, so you close once instead of twice.
How to Narrow the List in an Afternoon
Start with your constraints, not the product name. Three questions eliminate most of the field.
How long will you keep this loan? Do you qualify for a VA or USDA program based on service history or property location? How much cash can you put down without draining your emergency fund?
Keep the home fifteen years or more and a fixed rate is almost always the answer. Served in the military, run the VA numbers before anything else. Buying in an eligible rural area on a moderate income, and USDA’s zero-down structure beats FHA on both upfront and annual costs. Credit under 620, and FHA is often the only door open.
Then pull two or three Loan Estimates on the same day for the same loan amount and compare the closing cost details page line by line. Lenders advertise rates freely and bury fees, so a quarter point of rate saves you about $850 a year, which a $3,000 origination charge wipes out inside three. The loan type matters. So does the person selling it to you.