Choosing the right mortgage type can save you tens of thousands of dollars. Here’s a side-by-side comparison of every major option.
Quick Comparison: All Major Mortgage Types
| Mortgage Type | Down Payment | Credit Score | PMI/MIP | Best For |
|---|---|---|---|---|
| Conventional (30-yr fixed) | 3-20% | 620+ | Yes, if under 20% down | Most borrowers with good credit |
| Conventional (15-yr fixed) | 3-20% | 620+ | Yes, if under 20% down | Borrowers wanting fast equity + lower rate |
| FHA | 3.5% | 580+ (10% down if 500-579) | Yes (life of loan if <10% down) | First-time buyers, lower credit scores |
| VA | 0% | No minimum (620+ recommended) | No PMI | Military service members & veterans |
| USDA | 0% | 640+ | Guarantee fee (lower than PMI) | Rural/suburban homebuyers |
| 5/1 ARM | 3-20% | 620+ | Yes, if under 20% down | Short-term owners (moving in 5-7 years) |
| 7/1 ARM | 3-20% | 620+ | Yes, if under 20% down | Medium-term owners |
| 10/1 ARM | 3-20% | 620+ | Yes, if under 20% down | Less risk than 5/1, still lower initial rate |
| Jumbo | 10-20% | 700+ | Sometimes | High-cost areas, loans over $766,550 |
| Interest-only | 20%+ | 700+ | No (high equity required) | High earners with irregular income |
Conventional Loans (Most Common)
30-Year Fixed vs 15-Year Fixed
On a $336,000 loan:
| Feature | 30-Year Fixed | 15-Year Fixed | Difference |
|---|---|---|---|
| Interest rate | 6.50% | 5.80% | 0.70% lower |
| Monthly payment (P&I) | $2,124 | $2,810 | $686 more/month |
| Total interest paid | $428,582 | $169,851 | $258,731 saved |
| Total cost | $764,582 | $505,851 | $258,731 saved |
| Equity after 5 years | $36,300 | $105,400 | $69,100 more equity |
| Equity after 10 years | $86,400 | $232,100 | $145,700 more equity |
Conventional Loan Requirements
| Requirement | Minimum | Ideal |
|---|---|---|
| Credit score | 620 | 740+ (best rates) |
| Down payment | 3% | 20% (avoid PMI) |
| DTI ratio | 50% max | Under 36% |
| Employment | 2 years history | Stable W-2 employment |
| Reserves | 0-6 months | 6+ months |
| Loan limit (2026) | $766,550 (most areas) | Higher in high-cost areas |
FHA Loans
| Feature | Details |
|---|---|
| Min credit score | 580 (3.5% down) or 500 (10% down) |
| Down payment | 3.5% minimum |
| Upfront MIP | 1.75% of loan amount (can be financed) |
| Annual MIP | 0.55% of loan amount |
| MIP duration | Life of loan (if less than 10% down); 11 years (if 10%+ down) |
| Loan limits | $498,257 (floor) to $1,149,825 (ceiling) |
| Property | Must be primary residence |
| DTI max | 43% (up to 50% with compensating factors) |
FHA vs Conventional Cost Comparison ($336,000 home, 3.5% down)
| Item | FHA | Conventional (3% down) |
|---|---|---|
| Down payment | $11,760 | $10,080 |
| Loan amount | $324,240 | $325,920 |
| Upfront MIP/None | $5,674 | $0 |
| Rate | 6.25% | 6.75% |
| Monthly P&I | $1,996 | $2,113 |
| Monthly MIP/PMI | $149 | $195 |
| Total monthly | $2,145 | $2,308 |
| MIP/PMI duration | Life of loan | Until 20% equity (~8-10 years) |
| Total cost (30 yr) | $817,000 | $797,000 |
FHA is cheaper monthly but more expensive long-term due to lifetime MIP. Refinance to conventional once you have 20% equity.
VA Loans (Veterans/Military)
| Feature | Details |
|---|---|
| Down payment | 0% required |
| PMI | None |
| Funding fee | 1.25-3.3% (waived for disabled vets) |
| Credit score | No VA minimum (lenders typically want 620+) |
| Interest rate | Usually 0.25-0.50% lower than conventional |
| DTI max | No hard cap (residual income test used) |
| Loan limit | No limit for full entitlement |
| Property | Primary residence only |
| Assumable | Yes (huge benefit in high-rate environment) |
VA Funding Fee
| Down Payment | First Use | Subsequent Use |
|---|---|---|
| 0% | 2.15% | 3.3% |
| 5-9.99% | 1.50% | 1.50% |
| 10%+ | 1.25% | 1.25% |
| Disability rating | Waived | Waived |
USDA Loans
| Feature | Details |
|---|---|
| Down payment | 0% required |
| Location | Rural and suburban areas (check USDA eligibility map) |
| Income limit | 115% of area median income |
| Upfront guarantee fee | 1.0% of loan amount |
| Annual fee | 0.35% of loan amount |
| Credit score | 640+ (most lenders) |
| Property | Primary residence, single-family |
| Rates | Often competitive with or lower than conventional |
Adjustable-Rate Mortgages (ARMs)
How ARMs Work
| ARM Type | Fixed Period | Then Adjusts | Rate Caps (Typical) |
|---|---|---|---|
| 5/1 ARM | 5 years | Annually | 2/2/5 (first/annual/lifetime) |
| 5/6 ARM | 5 years | Every 6 months | 2/1/5 |
| 7/1 ARM | 7 years | Annually | 2/2/5 |
| 10/1 ARM | 10 years | Annually | 2/2/5 |
ARM vs Fixed Rate Scenario ($336,000 loan)
| Scenario | 5/1 ARM (5.75%) | 30-Yr Fixed (6.50%) |
|---|---|---|
| Monthly P&I (years 1-5) | $1,961 | $2,124 |
| Savings in first 5 years | $9,780 | — |
| If rate rises to 7.75% at year 6 | $2,367/mo | Still $2,124 |
| If rate rises to cap (10.75%) | $3,052/mo | Still $2,124 |
| Best if you | Sell/refinance within 5-7 years | Stay long-term |
Jumbo Loans
| Feature | Details |
|---|---|
| Loan amount | Above $766,550 (or local limit) |
| Down payment | 10-20% typical |
| Credit score | 700-720+ |
| Reserves | 6-12 months |
| Interest rate | 0.25-0.50% higher than conforming |
| DTI max | 43% (sometimes lower) |
| Documentation | More extensive income/asset verification |
Which Mortgage Type Is Right for You?
| Your Situation | Best Option | Why |
|---|---|---|
| Good credit (740+), 20% down | Conventional 30-yr or 15-yr | Best rates, no PMI |
| Good credit, 5-19% down | Conventional with PMI | PMI drops off at 20% equity |
| Fair credit (580-640) | FHA | Lower credit requirements |
| Military veteran/active duty | VA | 0% down, no PMI, low rates |
| Rural/suburban area, moderate income | USDA | 0% down, low fees |
| Selling/moving within 5-7 years | 5/1 or 7/1 ARM | Lower rate during fixed period |
| High-cost area ($766K+ home) | Jumbo | Only option above conforming limits |
| Self-employed, irregular income | Bank statement loan | Uses deposits vs tax returns |
| Buying investment property | Conventional (20-25% down) | Investor-friendly terms |
Interest Rate Comparison (Same Borrower, 2026)
| Loan Type | Typical Rate | Monthly P&I ($336K) | Total Interest (30 yr) |
|---|---|---|---|
| VA | 6.10% | $2,038 | $397,610 |
| 15-year conventional | 5.80% | $2,810 | $169,851 |
| 5/1 ARM | 5.75% | $1,961 (years 1-5) | Variable |
| Conventional 30-yr | 6.50% | $2,124 | $428,582 |
| FHA 30-yr | 6.25% | $1,996 | $405,578 + MIP |
| Jumbo 30-yr | 6.75% | $2,180 | $448,709 |
| USDA | 6.25% | $1,996 | $405,578 + fee |
Related: PMI Guide | First-Time Home Buyer Programs | Average Closing Costs | Mortgage Payment Calculator | Mortgage Affordability Calculator
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