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Types of mortgage loans in 2024

Updated 14 min read

In a housing market where mortgage rates are more impossible to predict than ever, knowing the types of mortgages available to you before making an application may be your key to punching a ticket to homeownership.

A little knowledge about mortgage types could help you take advantage of unique loan benefits you are entitled to. That might lower your interest rate and give you some breathing room on your monthly payment, or be your best shot at getting a new address.

Read more: How to get a mortgage in 2024

This is the most common type of mortgage and there are two subsets: conforming and non-conforming loans.

Conforming loan

A conforming conventional loan is not backed by any government agency, but the loans are built to the specifications of Fannie Mae or Freddie Mac so that mortgage lenders can sell the loans to them later on. Though these sound like federal agencies, Fannie and Freddie are actually private companies authorized by the government to put money into the mortgage system.

These mortgages require a good credit score, nothing lower than 620, and enough cash on hand for at least a 3% down payment and additional savings to pay closing costs.

Read more: What is a conforming loan, and how does it work?

Non-conforming loan

There are also non-conforming conventional loans. Non-conforming loans don't meet requirements set by Fannie Mae and Freddie Mac. Instead, they’re usually loans the lender intends to keep — not sell to another servicer.

Because of this, mortgage lenders have more leeway. They may be able to accept lower credit scores or down payments, offer unique repayment terms, or loan out amounts that are larger than what the Federal Housing Finance Agency allows. Common examples of non-conforming loans are FHA, VA, USDA, and jumbo loans, which we’ll go into below.

Learn more: What is a non-conforming loan, and how does it work?

High-cost homes require a jumbo mortgage because they exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In 2024, the minimum home value for a jumbo loan is $766,550 in most of the nation. In Alaska, Guam, Hawaii, and the US Virgin Islands, the minimum is $1,149,825.

Jumbo loans typically are best-suited for highly qualified mortgage applicants. Many lenders will look for at least a 10% down payment, and some prefer 20% or more. A credit score approaching 700 or even higher will likely be a requirement as well.

Learn more: How jumbo loans work

FHA loans (along with VA and USDA loans) are one type of government home loan.

Loans backed by the Federal Housing Administration are particularly suited for low-to moderate-income borrowers. FHA loans offer low down payment and minimum credit score requirements. That leeway can be the only way some Americans can put their name on a house. And while delinquency rates have historically been low, FHA mortgages have recently had a late-payment rate three times higher than conventional mortgages.

If you're living on the financial edge, it might be a good idea to boost your credit score and cash reserves before buying a home.

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Backed by the Department of Veterans Affairs, VA loans are a valuable benefit for service members, veterans, and eligible spouses. Usually requiring no down payment, VA loans eliminate a massive barrier for millions of eager home buyers.

But with the smallest supply of homes on the market in years, you may be competing with cash-flush conventional-loan buyers wooing home sellers with bigger earnest deposits and a willingness to forgo seller-paid closing costs.

Learn more:

Offered by the U.S. Department of Agriculture, USDA loans are particularly suited for low-income borrowers in agricultural and rural areas.

Yes, this is another zero-down-payment option, but to qualify, your household can't earn more than the family-income limit where you're buying — and the property needs to be in an eligible area.

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Fixed-rate mortgages have the same interest rate for the entire term of the loan. This means your monthly payment will stay the same, too (unless your costs of homeowners insurance or property taxes — also called escrow — go up).

You'll most likely need to choose between a 15-year versus 30-year mortgage term with a fixed-rate loan. The 30-year mortgage term has traditionally been the most popular; however, 15-year terms save a pile of interest, but the monthly payments are higher. Mortgage terms can also be 10, 20, or 25 years, depending on the lender you use. The FHA has even introduced a 40-year mortgage term as an option to homeowners struggling to meet payments.

Read more: How does a fixed-rate mortgage work?

Most borrowers think first about fixed-rate mortgages, where your interest rate is set from the beginning and never changes. With higher interest rates and more expensive homes, it’s worth at least thinking about an adjustable-rate mortgage.

With an ARM, your annual percentage rate is fixed for a number of years — say the first five, seven or even 10 years — and then the interest you pay will adjust every six months or annually. ARMs can come in many different forms.

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The above mortgages are all first-lien mortgages, meaning if you fail to make payments, the lender on those loans has a claim to your house first. They can foreclose on it, sell it off, and use the proceeds to pay off the debt you still owe them.

There are also second mortgages, which you can get in addition to first mortgages. With these, the lender won’t get repaid until after your first lender does (if you foreclose), so they’re a bit riskier than first mortgages are. For this reason, they typically come with higher interest rates and tougher qualifying requirements.

Learn more: What is a second mortgage, and how does it work?

A home equity loan is a second mortgage that allows you to borrow from your home’s equity. You can typically borrow up to 85% of your home’s value, minus whatever balance remains on your first mortgage loan. You’ll get the cash as a lump sum once you close on the loan.

You can use home equity loans to pay for renovations, consolidate debt, or any other purpose, and you’ll usually pay the lender back at a set rate and payment for five to 30 years. Sometimes, these come with a tax write-off, depending on how you use the money.

Dig deeper: What is a home equity loan? A complete overview

Home equity lines of credit — HELOCs — are a similar tool, only instead of a lump sum, you get a line of credit. This works very much like a credit card does, allowing you to use funds from the credit line, repay them, and use them again for an extended period of time.

These usually require interest-only payments for the first 10 years. After that, you’ll make mortgage principal and interest payments. These can fluctuate, as HELOCs often have variable rates, which move up or down over time.

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An assumable mortgage is a type of loan that can be taken over by another borrower, keeping the same terms and interest rate in the process. VA, FHA, and USDA loans are types of assumable loans.

Still, lenders have to approve the new borrower just as they would any person they loan money to. This will require filling out an application, submitting financial documents, verifying your employment, and other important steps. Not all borrowers will be approved.

Dig deeper: What is an assumable mortgage, and how can you get one?

Reverse mortgages are an option for senior homeowners. For the government version — called the Home Equity Conversion Mortgage (or HECM) — you need to be at least 62 to get one of these. Some lenders offer proprietary reverse mortgage programs that go down to age 55.

With reverse mortgages, instead of paying your lender, they pay you out of your home equity. You can choose a lump sum payment, a line of credit, or monthly payments — a popular choice for seniors on limited income. Sometimes, you can opt for a combination of these different payment options.

These loans don’t come with monthly payments. You’ll either repay the lender what you borrowed when you sell the home or move permanently away (to a nursing home, for instance), or your heirs will pay it off out of your estate when you pass.

Learn more: What is a reverse mortgage?

Qualified mortgages must meet requirements established by the Consumer Financial Protection Bureau (CFPB). Borrowers need to have a certain debt-to-income ratio (DTI) to qualify, and lenders can’t charge excessive fees or offer things like interest-only or balloon payments.

Non-QM loans don’t have to adhere to these regulations, so lenders have a lot more wiggle room. Lenders can accept lower credit scores or higher DTIs, or they might evaluate your income differently (perhaps with bank statements instead of W-2s and pay stubs).

These loans are often a good choice for freelancers, small business owners, or workers with non-9-to-5 income. Borrowers with low credit scores or lots of debt may also benefit from these types of loan programs. Not all lenders offer these, so you’ll need to shop around if you plan to use one for your home purchase or refinance.

Learn more: Non-QM loans — How a non-qualified mortgage can help you buy a home

An ITIN, or Individual Tax Identification Number, is an alternative to Social Security numbers for those who are ineligible for one. People living in the U.S. can use an ITIN when filing their annual tax returns with the Internal Revenue Service.

Some lenders offer loan programs just for these sorts of taxpayers, allowing them to qualify for a mortgage using their ITIN instead of an SSN. This often includes non-U.S. citizens and foreign nationals. Not all lenders offer these types of mortgages.

Dig deeper: ITIN loans — How to get a mortgage as a non-U.S. citizen

If you’re looking to build a home instead of buying an existing one, you may want to use a construction loan. These are mortgages you can use to foot the bill for the construction of a home — the materials, labor, permits, etc. Then, once the home is built, it transitions into a traditional mortgage, which you’ll pay off over time. These sometimes require two closings (one for the construction loan and one for your permanent mortgage).

With construction loans, the funds are usually distributed in several lump sum payments as construction progresses. There may also be an inspector involved who approves each milestone (which triggers each subsequent release of money).

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Land loans are designed for those looking to purchase plots of land. You might use one of these if you need land to build a home or business on and aren’t quite ready to start construction. (You’d likely use a construction loan in that case.)

When you get a land loan, you'll need to tell the lender how you plan to use the land, and they'll usually require certain checks of the property, too — to verify its zoning limitations, boundaries, utility access, and more. Again, not all lenders offer land loans, so you may need to shop around to find one that does.

Read more: Lands loans — How they work and how to qualify

Renovation loans are a tool for financing updates to a house you already own or, if you’re buying a fixer-upper, a house you’re about to purchase. For a home you want to purchase and renovate, your renovation loan will include the home’s price, as well as the estimated costs to renovate it. Common loan options in this category include FHA 203(k) loans, VA renovation loans, or Homestyle Renovation loans from Fannie Mae.

If you’re renovating an existing house, you might look to a home equity loan, HELOC, or cash-out refinance instead. There are also energy-efficient mortgages that can help you cover the costs of green updates, like adding solar panels or upgrading your insulation, for instance.

Read more: 4 types of home renovation loans and how to choose

A chattel loan is a type of mortgage used for buying manufactured housing — or some other piece of personal property that’s physically movable (like farm machinery, for instance). On these loans, the home or property (the “chattel”) serves as collateral on the loan and can be seized if you fail to make your payments.

Unlike traditional mortgages, chattel loans don’t help you buy the land on which your property sits. Instead, the loan only covers the home or other movable property you’re financing with it.

Learn more: How chattel loans work

Bridge loans are a type of mortgage designed to bridge the gap between two larger loans. You may use one when selling a home and buying a new one at the same time. These loans typically only last six months to a year or two.

One common way to use these is to take out a bridge loan large enough to pay for a down payment on a new house. You’d then get a traditional mortgage on the new house and, once your old one sells, use the sale proceeds to pay off the bridge loan and your old loan, leaving you with just one mortgage remaining.

Learn more: What is a bridge loan, and how does it work?

A piggy-back loan is a type of second mortgage you can use to make a larger down payment. Most borrowers who use these opt for the 80-10-10 method. This means they take out a main mortgage for 80% of the home’s price, a piggy-back loan for another 10%, and bring a 10% down payment out of their own savings to the table. This gives them a 20% total down payment and helps them avoid private mortgage insurance costs (PMI). It can also help you get a lower interest rate and better mortgage terms, too.

Balloon mortgages are a type of loan that come with an intro period of low (or no) monthly payments, but at the end of the loan's term, the entire balance comes due in full. These are usually shorter-term loans, lasting only a few years. Sometimes, they require interest-only payments until your balloon payment comes due.

In some versions of this loan type, you may get a set rate and payment for a certain period of time, and then once that period expires, your remaining balance is re-amortized, given a new rate (based on market conditions), and you'll make new payments based on that.

Learn more: What is a balloon mortgage, and when should you get one?

Some lenders offer mortgage programs for borrowers in specific career fields. A common example is the physician mortgage loan, which is aimed at doctors and others in the medical industry.

These loans function like traditional mortgage loans, though they may have easier qualifying requirements. For example, they might ask for no down payment or allow for higher debt-to-income ratios. This is because new doctors tend to have a lot of debt or little in savings due to recent medical school costs. (Though they have strong future earning potential and are unlikely to default on their loans.)

Read more: How do physician mortgage loans work, and who qualifies?

If you’re thinking of buying a home to rent out or fix and flip, you might consider an investment property mortgage. These are designed for properties you intend to make income from, and they often allow for alternative qualifying methods than other loans. For example, you may be able to use the future rent expected on the property to qualify.

Investment property mortgages usually require higher down payments than other loans and more in cash reserves. You'll typically need around six months of mortgage payments saved up to qualify.

Dig deeper: What are investment property loans, and how do you get one?

Interest-only mortgages delay paying down the principal for several years, temporarily lowering your payment. After the introductory period, your payment is higher and split between principal and interest, just like typical mortgages.

Tip: Interest-only mortgages can be risky, especially if the value of your home declines. You may have trouble refinancing the mortgage, selling the home, or affording your higher monthly payment.

Learn more: How does an interest-only mortgage work?

The most common types of mortgage loans are conventional (both conforming and jumbo), FHA, VA, fixed-rate, and adjustable-rate mortgages.

Interest-only mortgages are probably the riskiest types of home loans because you don't pay down your principal at all for the first several years, so you aren't building equity. It could also be financially difficult when regular mortgage payments kick in and you have to add the principal loan amount to your monthly payments.

FHA, VA, and USDA loans typically have the lowest mortgage rates. However, you could get an even lower rate for the first few years with an adjustable-rate mortgage (ARM). Just know that you'll risk your rate increasing once the intro-rate period is over with an ARM.