Most Common Types of Mortgage Loans

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Conventional and government-backed home loans are the most popular mortgage types, but many others may be a better option for you. 

While many people think of mortgages as a singular item, many types of mortgage loans are available to home buyers. Your credit score, financial goals and the type of home you want may determine which mortgage you should take out. 

In this guide, we’ll break down the most common types of mortgages, their basic eligibility criteria and how they work. We’ll also provide input from expert mortgage lenders on what you should keep an eye out for as a home buyer. 

Most Common Types of Mortgage Loans

Here are the five most common types of mortgage loans offered by mortgage lenders.  

1. Conventional Loans

A conventional loan is the most common type of home loan. These mortgages aren't government-backed and have different qualification requirements. Conventional mortgage lenders will examine your income and debt and require proof through pay stubs, W-2s, bank statements and tax returns to determine if you qualify for a loan and what interest rate you’ll pay. 

Generally, conventional loans have stricter qualification requirements than government-backed loans. 

There are two main types of conventional loans: 

Conforming Loans

Conforming loans meet the criteria set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises (GSEs). In 2025, you can borrow up to $806,500 for a conforming loan on a one-unit property, according to the Federal Housing Finance Agency. In certain high-cost areas like Alaska, Hawaii, Guam and the U.S. Virgin Islands, the limit is $1,209,750.

Non-conforming Loans

Non-conforming loans don't meet Fannie Mae and Freddie Mac’s criteria. Jumbo loans are a common example, as they exceed the maximum conforming limit. Other non-conforming loans include those for self-employed individuals, bank statement loans and interest-only mortgages. 

Pros of Conventional Loans

• Flexible solutions for various borrowers.
• No set maximum or minimum loan amounts. 
• Offers down payments as low as 3%.
• No private mortgage insurance requirement for down payments of 20% or more. 

Cons of Conventional Loans

• Has higher credit score and DTI requirements than FHA loans.
• Private mortgage insurance is required for lower down payments.
• Stricter qualification requirements than government-backed loans.

2. Government-Backed Loans

Government-backed loans are designed to encourage homeownership in rural and low-income neighborhoods. 

Here are the most common types of government-backed loans. 

FHA Loans

Federal Housing Administration (FHA) loans can be issued by any FHA-approved lender. They are designed to help low-income families and, therefore, have upper income limits. 

FHA loans usually have more relaxed income, credit score and down payment requirements than conventional loans. However, they tend to have higher interest rates and fees. 

Reed Letson, a mortgage broker and owner of Elevation Mortgage, notes that FHA loans require an upfront mortgage insurance premium equal to 1.75% of the loan amount. 

USDA Loans

U.S. Department of Agriculture (USDA) loans are designed to promote development in rural areas. If you plan to buy in a USDA-approved area, you could qualify with a 0% down payment and no PMI.

To qualify for a USDA loan, your income must meet eligibility limits. You'll need a credit score of 620 or higher and usually a DTI of 41% or less, although some lenders may make an exception. You can find USDA-designated rural areas here. 

VA Loans

Veterans Affairs (VA) loans are one of the most attractive loan options if you're a veteran or active-duty service member. VA loans are issued by VA-approved lenders according to VA-mandated guidelines. 

There's no minimum down payment; you don't have to pay for mortgage insurance. VA loans are known for competitive interest rates and more flexible qualification requirements than conventional mortgages. However, to qualify, you must get a certificate of eligibility for active service or meet other VA criteria. 

Pros of Government-Backed Loans

• Possibility of 0% down payment.
• Better interest rates than conventional loans (in some cases).
• More flexibility qualification requirements. 
• Helps more families buy a home. 

Cons of Government-Backed Loans

• Must meet specific requirements (income, veteran status or rural location).
• MIP for FHA loans.
• Must be the primary residence for VA loans. 

3. Fixed-Rate Mortgages

Fixed-rate mortgages have a fixed interest rate for the duration of the loan. This is the most common type of mortgage and can refer to either conventional or government-backed loans. Fixed loans usually have terms of 15 years or 30 years, although you could get a different length.

Pros of Fixed-Rate Mortgages

• Your interest rate is locked in for the duration of the loan.
• You know exactly how much you'll pay each month.
• If you lock in a lower interest rate, that will remain even if market interest rates increase. 

Cons of Fixed-Rate Mortgages

• If interest rates dramatically drop, you're locked in with a higher interest rate. 
• Interest rates are usually higher than adjustable-rate loans' introductory rates.
• You'll need to refinance to get a lower rate.

4. Adjustable-Rate Mortgages

Adjustable-rate mortgages (ARMs) are the opposite of fixed-rate mortgages. With an ARM, interest rates change over time. You'll usually get a lower, fixed introductory rate for a period. After this period, the rate changes at predetermined intervals. 

For example, a 5/6 ARM means you'll get the introductory rate fixed for the first five years. After that, the rate changes every six months based on the market index rates your mortgage is tied to. If the interest rate increases, your mortgage payment will as well. 

Jason Lerner, an area manager at First Home Mortgage, says there are some “really personal elements” that go into deciding whether an ARM is the best choice for a homeowner. “There’s things like how long are you going to be in that house,” he says.

Lerner adds that someone who plans on selling the house before paying off the mortgage may not reap the benefits of an ARM. Additionally, unless there’s a drastic drop in interest rates, you likely won’t save that much money. 

“A decrease of a quarter-percent or half-percent may not decrease your payments as much as you’d hope for,” he says. 

Pros of Adjustable-Rate Mortgages

• Lock in a lower interest rate for a set period
• Useful for homeowners who plan to move before the fixed period ends
• You could pay less over time if interest rates fall

Cons of Adjustable-Rate Mortgages

• More difficult to budget for
• Risk of higher future monthly payments

5. Jumbo Mortgages

Jumbo mortgages exceed conforming loan limits. In 2024, the FHFA’s conforming loan limits are $806,500 or $1,209,750 in higher-cost areas. These loans present more risk to lenders and borrowers but can allow you to purchase more costly homes. 

Pros of Jumbo Loans

• Buy a more expensive house
• You can still get competitive interest rates on par with those on conforming loans.
• Useful in areas with high home values.

Cons of Jumbo Loans

• Higher down payment requirement, usually 10% or more.
• Not available with every lender.
• You'll need a higher credit score to qualify, often 700+

Other Types of Mortgage Loans

Here is an overview of the other types of mortgages to consider:

Balloon Mortgages

A balloon mortgage means you'll make a large payment at the end of the loan term. Usually, these mortgages are initially based on a 30-year term but could become due in a much shorter time, often seven years. That means you'll need to be prepared to repay the remainder of the mortgage after a (relatively) short time. 

Construction Loans

Construction loans allow you to build your own home. You could also get a construction-to-permanent loan, which converts to a traditional mortgage once you actually move into the residence. 

Interest-Only Mortgages

With an interest-only mortgage, as the name implies, you'll only pay interest (and not repay the principal) for a period, usually five to seven years. The best interest-only mortgage lenders can help you find a loan that fits your needs. These loans make sense for people who plan to move or expect significantly higher income within the interest-only time frame. 

Non-Qualifying Loans

Non-qualifying mortgages are available to borrowers who don't meet the Consumer Financial Protection Bureau (CFPB) standard qualification requirements. Lenders may have more lenient credit and income requirements. You can consider this loan if you're self-employed, a small-business owner or have negative marks on your credit history.

Physician Loans

A physician loan is specifically for doctors, nurses, dentists and other medical professionals with large amounts of medical school debt. These loans allow for the lack of income and assets, credit history and debt loads for medical professionals who may have spent longer in school. 

Piggyback Loans

A piggyback loan is two loans that can help you avoid private mortgage insurance or a jumbo loan. One loan is for 80% of the home price and another is for 10%. You'll have to pay 10% as a down payment. There’s a required down payment for the remaining 10%. The downside is that you'll have to pay closing costs on both loans. 

Portfolio Loans

Portfolio loans are offered to investors and don't have to meet conforming loan standards. They may have more lenient qualifications but also come with higher fees or interest rates. Instead of selling these loans, portfolio lenders hold them. 

Renovation Loans

If you're buying a home that needs major repairs, you could get a renovation loan. A renovation loan combines the cost of purchase plus (estimated) repairs in a single mortgage.

What’s the Best Type of Mortgage Loan for Me? 

There are flexible mortgage solutions for nearly every family. Low credit scores, down payment or income shouldn't stop you from buying a home with some support. In addition, you can check out first-time homebuyer programs by state to see if you qualify for additional assistance.

Here are other things to remember during the home buying process. 

• The most popular types of mortgages are conventional or government-backed.
• You could qualify for a loan with a 0% down payment or low credit score.
• There are construction loans, non-qualifying mortgages or renovation mortgages for specialized needs.
• Research options and speak with lenders to choose the best loan.

Why You Should Trust Us

Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his New York City economy coverage. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.

For this story, we worked with Reed Letson, a mortgage broker and owner of Elevation Mortgage in Colorado; and Jason Lerner, an area manager for First Home Mortgage and a 22-year mortgage industry veteran.

Frequently Asked Questions 

Sources

• Federal Housing Finance Agency, “FHFA Announces Conforming Loan Limit Values for 2025,” https://www.fhfa.gov/news/news-release/fhfa-announces-conforming-loan-limit-values-for-2025
• Jason Lerner, area manager for First Home Mortgage and a 22-year veteran of the mortgage industry
• Reed Letson, mortgage broker and owner of Elevation Mortgage