How Many Types of Mortgage Loans Are Available?
When folks come to me for help buying a home or refinancing, one of the most common questions I get is: “What kind of loan options are out there?” The answer might surprise you—there are a lot more types of mortgage loans than just conventional or FHA. Today, I want to walk you through the major categories and help you understand how different loans fit different financial needs and life situations.
Conventional Loans:
Let’s start with the most common type: Conventional Loans. These are often backed by Fannie Mae or Freddie Mac, which are government-sponsored enterprises (or GSEs). While they don’t lend directly to borrowers, they do purchase mortgages from lenders like us and package them into Mortgage-Backed Securities (MBS), which are then sold to investors. That connection to the 10-Year Treasury Bond helps keep interest rates competitive.
Why choose a conventional loan?
- You can borrow up to 97% loan-to-value (LTV).
- Great for first-time homebuyers (FTHBs).
- Appraisal waivers are sometimes available.
- More loan options with a standardized process.
- Can be used for investment properties and second homes.
- When mortgage insurance (MI) is needed, it’s typically lower cost.
- And let’s not forget—higher conforming loan limits are a big advantage in higher-priced markets.
FHA Loans:
FHA loans, backed by the Federal Housing Administration, are designed to make homeownership accessible—especially for those with lower credit scores or smaller down payments. These loans are incredibly forgiving when it comes to credit and income ratios.
Key benefits of FHA loans include:
- Lower down payments and higher LTVs.
- Accept lower credit scores and higher debt-to-income ratios (DTIs).
- Fewer loan-level price adjustments (LLPAs).
- Lower interest rates, especially for borrowers with credit challenges.
- Excellent option for first-time buyers, often paired with down payment assistance (DPA) programs.
FHA also offers a streamline refinance program that can lower your rate, reduce your payment, and do so with minimal costs and no appraisal.
One of my favorite FHA products is the Rehab Loan:
- Finance up to $75,000 in repairs.
- 96% financing on purchases, 97% on refinances.
- Finance up to 110% of the home’s future value.
- You choose the contractors.
- Available for primary and secondary homes.
- You get 6 months to complete the renovations—plus all the traditional FHA benefits.
VA Loans:
If you’ve served in the military—thank you. The VA loan is one of the best benefits available to veterans and active-duty service members.
What makes VA loans stand out?
- No down payment required.
- Highest allowable LTV in the market.
- Lower credit score and higher DTI allowances.
- Limited LLPAs and lower interest rates.
- You must have a Certificate of Eligibility (COE), but that’s something we can help you obtain.
VA loans can even be used for multi-unit properties and offer an excellent refinance option through the VA IRRRL (Interest Rate Reduction Refinance Loan):
- Lowers your rate and payment.
- Minimal out-of-pocket costs.
- Streamlined process with fewer documents required.
USDA Loans:
Not as well-known, but USDA loans can be a game-changer if you’re buying in a rural area. These loans are backed by the U.S. Department of Agriculture and offer:
- Zero down payment.
- Higher LTVs and lower credit score thresholds.
- Lower interest rates.
- Best of all? No monthly mortgage insurance (PMI).
If you’re looking to buy outside the metro area and want to keep upfront costs low, a USDA loan could be exactly what you need.
So, How Many Loan Types Are There?
There’s no one-size-fits-all answer, because your best mortgage option depends on your financial profile, goals, and the property you’re purchasing. At Affordable Interest Mortgage, I take the time to match each client with the right product, whether that’s a conventional, FHA, VA, USDA, or even a Non-QM (non-qualified mortgage) for those who need something outside the box.
Bottom line: There are more ways than ever to finance a home, and I’m here to help you find the one that works best for you.
Let’s talk options, and let’s make a smart plan for your future.
With gratitude,
Kurt Rogers
Managing Broker, Affordable Interest Mortgage
📞 (720) 895-0500
🌐 www.aimortgage.net
NMLS #217147 | IMB #2191655 | Equal Opportunity Lender | Regulated by the Division of Real Estate
