What type of mortgage is best for first-time buyers?

FHA loans are most popular for first-time buyers due to 3.5% down payment and 580 minimum credit score requirements. Conventional loans with 3% down are also good for those with 620+ credit. VA loans (0% down) are best for military members. For rural areas, USDA loans offer 0% down with no PMI.

Should I get a 15-year or 30-year mortgage?

A 30-year mortgage has lower monthly payments (more budget flexibility) but costs significantly more in interest. A 15-year mortgage saves $100K-$200K+ in interest and has lower rates, but requires higher monthly payments. Choose 30-year for flexibility and invest the difference, or 15-year if you can comfortably afford it and want to build equity faster.

Mortgage Types Compared: Fixed, ARM, FHA, VA, USDA & More (2026)

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