10 Types of Mortgage Loans Explained
Buying a home in 2026 isn’t just about finding the right property — it’s about securing the right type of financing for your specific financial needs. The type of mortgage you choose will have a direct impact on your immediate and ongoing affordability. From conventional loans to government-backed programs, each option is designed for a specific type of mortgage borrower.
This guide breaks down 10 of the most common mortgage types to help you find the best option for your financial situation and long-term goals.
At a glance: 10 mortgage types
| Mortgage type | Best for | Min. credit score* | Min. down payment* | Key features |
|---|---|---|---|---|
| Conventional loans | Borrowers with solid credit and stable income | 620 | 3% | Flexible terms; PMI required under 20% down |
| Fixed-rate mortgages | Buyers who want predictable payments | Varies by loan type | Varies by loan type | Interest rate stays the same for the life of the loan |
| Adjustable-rate mortgages (ARMs) | Buyers planning to move or refinance in a few years | Varies by loan type | Varies by loan type | Lower initial rate that adjusts after a set period |
| Jumbo mortgages | High-cost homebuyers exceeding conforming loan limits | 680 to 700+ | 10% to 20% | Larger loan amounts; stricter requirements |
| FHA loans | First-time buyers or lower credit borrowers | 580 (or 500 to 579 with 10% down payment) | 3.5% (580+) | Government-backed; more flexible qualification |
| VA loans | Eligible veterans, service members and spouses | Typically 620 | 0% | No down payment, no PMI and competitive rates |
| USDA loans | Rural and some suburban homebuyers with moderate income | Typically 640 | 0% | No down payment; income and location limits apply |
| Second mortgages (home equity loans and HELOCs) | Homeowners tapping existing equity | Varies by lender | Varies (equity required) | Borrow against home equity via a lump sum or line of credit |
| Reverse mortgages | Homeowners age 62+ accessing equity | Varies (often not score-driven) | N/A | Convert home equity into income; no monthly payments required |
| Non-qualified mortgages (non-QM) | Self-employed or non-traditional borrowers | Varies by lender | Varies by lender | Flexible underwriting, alternative income verification |
1. Conventional loans
A conventional loan is any mortgage that isn’t backed by the federal government. Conventional loans have higher minimum credit score requirements than other loan types — typically 620 — and are harder to qualify for than government-backed mortgages. Borrowers who make less than a 20% down payment are typically required to pay private mortgage insurance (PMI) on this type of mortgage loan.
The most common type of conventional mortgage is a conforming loan. It adheres to Fannie Mae and Freddie Mac guidelines and has loan limits, which often change annually to adjust for home price changes. The 2026 conforming loan limit is $832,750 for a single-family home in most of the U.S.
Key features:
- Minimum 620 credit score
- Borrowers must provide in-depth income, employment, credit, asset and debt documentation for approval
- PMI required for a down payment below 20%
Pros
- Can be used for a wide variety of purchases, from a primary residence to an investment property
- You can get rid of PMI once you reach 20% equity
Cons
- Can be more difficult to qualify for
- You must pay PMI if you put down less than 20%
Ideal for: Borrowers with a steady income and employment history, strong credit and at least a 3% down payment.
2. Fixed-rate mortgages
A fixed-rate mortgage is a home loan with a mortgage interest rate that stays the same for the entire loan term. The rate included on your closing disclosure is the same rate you’ll have for the length of your repayment term, unless you sell or refinance your mortgage.
Two common fixed-rate options are 15- and 30-year mortgages. Generally speaking, fixed-rate loans offer more stability and predictability to help you better budget for housing costs since the core of your monthly housing payment (principal and interest) will not change for the life of the loan.
Key features:
- A fixed interest rate that won’t change over the life of the loan
- Multiple loan terms available
Pros
- A fixed monthly principal and interest payment
Cons
- Longer term lengths mean paying more interest overall
- Interest rates may initially be higher than adjustable-rate loan
Ideal for: Borrowers who prefer stable principal and interest payments on their mortgage.
3. Adjustable-rate mortgages
An adjustable-rate mortgage (ARM) is a type of mortgage loan with a variable interest rate. Instead of staying fixed, it fluctuates over the repayment term. One popular ARM option is the 5/1 ARM, which is considered a hybrid mortgage because it starts with a fixed-rate period and then converts to an adjustable-rate period.
With a 5/1 ARM, the interest rate is fixed for the first five years and then adjusts annually for the remainder of the loan term. ARMs usually start off with lower rates than fixed-rate loans but can go as high as 5 percentage points above the fixed rate when they adjust for the first time.
Example: Someone who owes $350,000 on a new 30-year home loan with a 4% introductory interest rate has a monthly principal and interest payment of $1,671. If the rate resets 5 percentage points higher at the first adjustment, the principal and interest payment would increase to $2,816 per month overnight.
Key features:
- A variable rate, which can change based on market conditions
- An initial mortgage rate that can be lower than fixed-rate loans
- A lifetime adjustment cap, meaning the variable rate can’t jump by more than 5 percentage points over the life of the loan
Pros
- Initial monthly payments may be more affordable than a fixed-rate loan
- If interest rates fall, so will your monthly payment ( an interest rate floor can apply)
Cons
- A riskier loan option because you can’t control future monthly payments
- If you can’t refinance or sell before the rate adjusts, you could be stuck with higher monthly payments
Ideal for: Borrowers who plan to move or refinance before the fixed-rate period ends.
4. Jumbo mortgages
A jumbo mortgage is used to purchase homes with prices that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. Jumbo loans often require a 20% down payment.
While costs vary by lender, jumbo mortgage rates are often higher than conforming rates because the lender is taking on additional risk with the higher loan amount.
Key features:
- Large loan amounts that exceed the limits for conforming loans
- Stricter credit score and down payment requirements than conforming loans
Pros
- Can be used for a wide range of high-priced property types
- Available with a variety of loan terms
Cons
- Will typically have a higher interest rate than conforming loans
- Stricter underwriting requirements
Ideal for: Borrowers who need a mortgage that exceeds conforming loan limits.
5. FHA loans
The Federal Housing Administration (FHA) backs these types of mortgage loans, which cater to borrowers with credit blemishes and limited down payment funds. You can qualify for an FHA loan with a 580 credit score and a minimum 3.5% down payment. If your score is between 500 and 579, you’ll need a 10% down payment. In 2026, the FHA loan limit in most U.S. counties is set at $541,287 for single-family homes. In high-cost areas, the single-family FHA loan limit is $1,249,125.
FHA loans have mandatory mortgage insurance premiums. Borrowers must pay both upfront FHA mortgage insurance and an annual premium. The amount and duration of this payment depend on the details of the loan.
Key features:
- Requires just a 580 credit score to qualify for the 3.5% minimum down payment
- Includes an upfront and annual mortgage insurance premium
- The ability to buy a multifamily property (maximum of four units) as a primary residence with just 3.5% down and at least a 580 score
Pros
- Available to first-time and repeat buyers
- No income limits
- Easier to qualify for than conventional loans
Cons
- You must live in the property, even if you rent out other units
- Loan limits are lower than those of conventional loans
- You’ll pay two forms of mortgage insurance premiums
Ideal for: First-time homebuyers or any borrower with lower credit scores and minimal down payment savings.
6. VA loans
Military service members, veterans and eligible spouses may qualify for a loan backed by the U.S. Department of Veterans Affairs (VA).
In the vast majority of cases, VA loans don’t require a down payment. While the VA doesn’t have a minimum credit score requirement, VA lenders may expect a minimum credit score of 620. In addition, the VA no longer has loan limits for borrowers with full VA loan entitlement (typically those who have never used their VA loan benefits or have paid their existing VA loans in full).
Key features:
- Provides opportunities for military members, veterans and eligible spouses to buy a home
- Doesn’t require a down payment in most cases
Pros
- No down payment required
- No income or loan limits
- No mortgage insurance requirement
- Competitive interest rates
- Offers mortgage loans for buying, building, renovating and manufactured homes
Cons
- Must pay a VA funding fee
- Military service or affiliation required
Ideal for: Qualified military borrowers who need a no-down-payment loan option.
7. USDA loans
The U.S. Department of Agriculture (USDA) guarantees USDA loans to low- and moderate-income buyers looking to purchase homes in designated rural areas. Down payments aren’t required for these types of home loans, but there are income limitations.
Key features:
- Caters to borrowers buying homes in USDA-designated rural areas
- Doesn’t require a down payment
- Guarantee fee charged in place of mortgage insurance
Pros
- Available for a wide range of home types, including single-family homes, condos, modular and manufactured homes
- No down payment required
Cons
- Can only be used for homes in eligible rural areas
- The home must be your primary residence
- Income limits apply
- Must pay an annual guarantee fee
Ideal for: Borrowers with a modest income who want to live in a rural area of the country.
8. Second mortgages: Home equity loans and HELOCs
A second mortgage is a type of home loan that allows you to borrow against the equity you’ve built up over time.
Both home equity loans and home equity lines of credit (HELOCs) are types of second mortgages. A home equity loan is a lump-sum amount. It typically comes with a fixed interest rate and is repaid in fixed installments over a set term. A HELOC is a revolving credit line with a variable rate that works similarly to a credit card. The funds can be used, repaid and reused as long as access to the credit line is open.
Home equity loans vs. Home equity lines of credit (HELOCs)
| Feature | Home Equity Loan | Home Equity Line of Credit (HELOC) |
|---|---|---|
| How it works | You borrow a lump sum upfront and repay it in fixed monthly installments over a set term | You’re approved for a credit line and can borrow as needed during a draw period, then repay what you use |
| Interest rate | Usually fixed | Usually variable |
| Payments | Predictable, fixed monthly payments | Payments vary based on how much you borrow and current interest rates (often interest-only during draw period) |
| Access to funds | One-time payout | Ongoing access to funds (like a credit card) |
| Best for | One-time, large expenses like home renovations, debt consolidation or major purchases | Ongoing or uncertain expenses like phased home projects, tuition or emergency funds |
Key features:
- Allows borrowers to tap their home equity for any purpose, including debt consolidation or home improvement
- Includes lump-sum and credit-line options
- Uses a borrower’s home as collateral, like a first mortgage
Pros
- Access cash when you need it
- You can tap into home equity without changing the terms of a first mortgage
Cons
- May only be able to borrow up to 80% of your home’s value in total, although exceptions apply
- Higher interest rates compared to first mortgages
Ideal for: Borrowers who want to use their existing equity to fund other financial goals.
9. Reverse mortgages
Homeowners ages 62 and older may qualify for a reverse mortgage, a type of home loan that differs from a traditional, “forward” mortgage. Instead of you making payments to your lender, your reverse mortgage lender makes lump sum or monthly payments to you from your available equity.
The home equity conversion mortgage (HECM) is the most common type of reverse mortgage. It’s insured by the FHA and comes with several upfront and ongoing costs. HECMs, like FHA loans, also have loan limits. For 2026, the maximum loan limit for an HECM is $1,249,125. You have many options for repaying a reverse mortgage, including selling your home or refinancing to take out a new, forward mortgage to cover what’s owed.
Key features:
- Considerable home equity required
- Doesn’t require payments until the home is sold or the borrower or eligible spouse moves out or passes away
- Requires borrowers or surviving spouses to continue to maintain the home, live in it as a primary residence and pay property taxes and homeowners insurance
Pros
- No income or DTI ratio requirements
- Tap into your home equity without having to sell or move
- No monthly payments unless you move out of the house
- Income from the reverse mortgage payouts won’t be taxed
- You can pay off a first mortgage with a reverse mortgage
Cons
- For married couples, the youngest spouse’s age determines qualification
- Failure to properly maintain the house or pay property taxes or home insurance can lead to foreclosure
- Only for homeowners ages 62 and older who have significant home equity
Ideal for: Homeowners 62 and older with a substantial amount of equity who need supplemental retirement income.
10. Non-qualified mortgages (non-QM)
Non-qualified mortgages (non-QM) are a type of home loan geared to borrowers who may have trouble getting approved for a traditional mortgage. These loans do not meet the typical mortgage requirements of a Qualified Mortgage (QM) – set by Fannie Mae, Freddie Mac or government agencies, including the presence of loan limits, limits on upfront points and fees and a lack of certain “risky” loan features.
These loans can make sense for borrowers who do not have a credit score, as well as those who are self-employed. Borrowers with significant assets but relatively low incomes may also benefit from non-qualified mortgages.
Key features:
- For borrowers seeking bank statement loans, asset-based qualification and interest-only options
- Aimed at borrowers with credit issues, self-employment income and investors with non-traditional income sources
- May have unique features like balloon payments, interest-only payments or longer repayment terms
Pros
- Helps borrowers qualify for a mortgage when they might not otherwise be approved
- More relaxed credit requirements
- Ability to use alternative documentation (like bank statements) to prove income
Cons
- Can come with risky features that are not allowed with Qualified Mortgages
- Not all lenders offer these loans
Ideal for: Borrowers with irregular income or credit issues who are seeking bank statement loans, asset-based qualification and interest-only options.
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