What are the different types of mortgage loans?
FHA vs Conventional vs VA vs USDA vs NonQM Loans: Key Differences
By Jason Iacovelli, NMLS #3370 | Updated December 2025
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What are the different types of mortgage loans?
The main mortgage types are: FHA (3.5% down, 580 credit, MI for life), Conventional (3% down, credit eligibility based on automated underwriting findings, subject to final lender review, PMI cancellation available on request when eligible), VA (0% down, no monthly MI, veterans only), USDA (0% down, rural areas, income limits), and NonQM (flexible for self-employed). Choose based on your credit score, down payment, military status, and property location.
Key Takeaways
- FHA: 3.5% down, 580 credit, mortgage insurance for life of loan
- Conventional: 3% down, credit eligibility based on automated underwriting findings, subject to final lender review, PMI cancellation available on request when eligible
- VA: 0% down, no monthly MI, for eligible veterans/service members
- USDA: 0% down, 640 credit, rural areas only with income limits
- NonQM: Flexible for self-employed, bank statement income verification
Choosing the right mortgage can save you thousands. Whether you're a first-time buyer, a veteran, or self-employed, understanding the differences between FHA, conventional, VA, USDA, and NonQM loans is essential.
FHA Loans: Accessible Homeownership
- Credit Score: 500 minimum (10% down) or 580+ (3.5% down)
- Down Payment: As low as 3.5%
- Mortgage Insurance: 1.75% upfront + 0.55-0.85% annual (often for life)
- Best For: First-time buyers, lower credit scores
Conventional Loans: Flexibility & Savings
- Credit Score: No blanket 620 minimum. Credit eligibility depends on automated underwriting findings, with final approval subject to lender review. A score of 740+ gets the best rates.
- Down Payment: 3-5% minimum
- Mortgage Insurance: PMI required if less than 20% down, cancellation available on request when eligible
- Best For: Good credit, higher-priced homes
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VA Loans: Benefits for Veterans
- Credit Score: no fixed minimum score, including no-score borrowers, subject to lender review
- Down Payment: 0% down payment
- Mortgage Insurance: No monthly MI, but 2.15-3.3% funding fee
- Best For: Eligible veterans and service members
USDA Loans: Rural Homeownership
- Credit Score: 640 minimum
- Down Payment: 0% down payment
- Location: Designated rural/suburban areas only
- Best For: Rural buyers with moderate income
Which Loan Is Right for You?
Choose FHA If:
- Credit score 580-679
- Limited down payment (3.5%)
- First-time buyer
Choose Conventional If:
- Credit score 680+
- Want to remove PMI
- Higher-priced home
Jason Iacovelli
Licensed Mortgage Broker
Jason Iacovelli is a licensed mortgage broker serving the Raleigh-Durham Triangle area. Jason helps buyers compare all loan types to find the best fit for their unique financial situation.
Last reviewed and updated: December 31, 2025
Frequently Asked Questions About Mortgage Loan Types
Comparing FHA, Conventional, VA, USDA, and NonQM loans