What are the Different Types of Mortgages?

Buying a home is a big step—whether it’s your first or your fifth. And with this process comes the important task of understanding your financing options. Afterall, picking the wrong mortgage could cost you thousands of dollars and years of regret. So, before you buy a house, there’s one (very big) decision to make: what kind of mortgage should you choose? Keep reading to compare home loan options and find a mortgage that works for you.

Mortgage Categories: Government-Backed vs. Conforming vs. Non-Conforming

Broadly, home loans fall into three buckets: government-backed loans, conforming loans, and non-conforming loans. Government-backed loans—like FHA, VA, and USDA loans—are insured by federal agencies. They often come with flexible qualification requirements, making them a great choice for buyers with less-than-perfect credit.

Conforming loans follow guidelines set by Fannie Mae and Freddie Mac, which set standardized limits and terms. These loans typically offer competitive mortgage interest rates. On the other hand, non-conforming loans do not meet these standards and are instead offered by lenders with their own terms. Many non-conforming loans are tailored for specific financial situations or property values, meaning terms and rates can vary widely.

What Are Different Types of Mortgages?

Whether you are a first-time buyer, seasoned homeowner, or somewhere in between, it’s crucial to understand your mortgage options. Afterall, each type of home loan is intended to meet different financial needs and goals. Let’s take a closer look at some common mortgage types that are available today:

1. Conventional Loans

What are conventional loans? Conventional home loans are one of the most popular mortgage options because they are straightforward and get the job done. These conforming loans are a great choice for homebuyers with strong financial profiles (including good credit and stable income). In addition, they are not backed by government agencies (like VA or FHA loans), so there are stricter conventional loan requirements.

Highlights of Conventional Loans:

• Loan Limit: Must be under $806,500, but it varies by location.
• Minimum Down Payment: Typically requires a 3-5% down payment for first-time buyers or 5% for others.
• Competitive Interest Rates: Borrowers with higher credit scores can secure lower interest rates.
• Flexibility: Used for primary homes, vacation properties, and even investment properties.
• Low Cost Advantage: No extra insurance fees if you put down 20% or more. This means lower long-term costs.
• Simplified Process: Appraisals, inspections, and paperwork are generally more straightforward compared to government-backed loans.

Who Should Get a Conventional Loan? The best candidates are buyers with steady income, strong credit, and enough savings to handle a conventional loan down payment.

Conventional Loans at Academy Bank

2. FHA Loans (Often Called First-Time Homebuyer Loans)

Buying your first home? FHA loans are a great choice if you are new to the world of mortgages. Backed by the Federal Housing Administration, these loans are tailored to help first-time buyers enter the housing market with lower upfront costs. This makes homeownership more accessible and less daunting.

Highlights of FHA Home Loans:

• Lower Credit Requirements: Available to borrowers with lower credit scores (typically 580+).
• Reduced Down Payment: Enjoy down payments as low as 3.5%, making it easier to get started.
• Flexible Debt-to-Income Ratio: Perfect for those with student loans or other financial obligations.

Who Should Get a FHA Loan? Potential borrowers are first-time buyers who have a limited credit history or tighter budgets.

FHA Loans at Academy Bank

3. VA Mortgages

If you are a U.S. military veteran or currently serving, VA home loans could be the ultimate thank-you gift for your service! VA loans are backed by the Department of Veterans Affairs, and they provide a mix of benefits that no other loan types offer—making them one of the best options available for borrowers.

Highlights of VA Mortgages:

• Zero Down Payment: Purchase a home without needing a hefty deposit.
• No PMI: VA loan borrowers are not required to have private mortgage insurance*, helping them save money on monthly costs compared to conventional loans.
• Competitive VA Loan Rates: Low fixed interest rates for lower monthly payments.

Who Should Get a VA Home Loan? Applicants must have VA eligibility from serving in the military. This includes veterans, active-duty service members, and eligible family members.

VA Loans at Academy Bank

4. Jumbo Loans

If your dream home has a price tag larger than most loans can handle, you will need a jumbo mortgage. By offering higher borrowing amounts, this non-conforming loan helps buyers finance properties that exceed conventional loan limits. It’s also important to note that jumbo mortgages come with strict requirements, so be prepared to meet a higher credit score threshold, provide extensive documentation, and possibly make a larger down payment.

Highlights of Jumbo Home Loans:

• Higher Loan Limits: As mentioned, they are perfect for properties exceeding the conforming loan limits set by Fannie Mae and Freddie Mac (over $806,500, but it varies by location).
• Stricter Qualification Standards: Requires a higher credit score (usually 700+) and a larger cash reserve.
• Larger Down Payment: Usually requires at least 20% down.
• Higher Rates: Jumbo loan interest rates have traditionally been higher than conventional conforming loans because they carry greater risk for lenders, who offset that risk with higher rates.
• Considered a Specialty: Find a mortgage lender and loan officer who has deep knowledge of jumbo loan requirements, their features, and potential challenges.

Who Should Get a Jumbo Loan? Buyers purchasing luxury homes/properties in high-cost-of-living areas and buyers investing in larger, high-value properties are possible candidates.

Jumbo Home Loans at Academy Bank

5. Hero Home Loans

Not all heroes wear capes, but if you are an educator, first responder, or healthcare worker, these loans are dedicated to you! Academy Bank’s Hero Loan Program includes non-conforming loans designed to give back to those who serve our communities.

Highlights of Hero Loans:

• Lower Down Payment Requirements: Hero Loans offer down payments as low as $0.
• Special Terms: Their tailored benefits created to match the financial demands of heroes in critical roles.
• $0 Lender Origination Fees: Academy Bank waives upfront charges, which reduces costs and makes the loan more affordable.

Who Should Get a Hero Home Loan? It’s a great fit for everyday heroes who want affordable ways to achieve their homeownership dreams. This includes police department staff, law enforcement (local, state, and federal), fire department staff, EMTs, paramedics, EMS department staff, K-12 teachers and school staff, registered nurses, and military veterans and their spouses.

Hero Loans at Academy Bank

6. Premier Choice Loans for Professionals

If you are a professional with a demanding career, Academy Bank’s Premier Choice Loan Program is built just for you. This non-conforming mortgage program was created for high-achieving individuals balancing intense work schedules and their financial obligations. Plus, Premier Choice Home Loans provide exclusive benefits than standard home loan products simply do not offer.

Highlights of Premier Choice Loans:

• No Mortgage Insurance: Save hundreds of dollars each month by avoiding PMI.
• 100% Loan-to-Value Financing: Eligible borrowers can become homeowners with 0% down.
• Competitive Mortgage Rates: Enjoy the best interest rates, even on larger loan amounts.

Who Should Get a Premier Choice Home Loan? The right candidates are professionals with jobs in medicine, law, and other high-achieving industries who want a hassle-free mortgage. This means home loans for attorneys, dentists, surgeons, medical doctors, psychiatrists, nurse practitioners, physician assistants, pharmacists, veterinarians, resident doctors, ophthalmologists, optometrists, osteopaths, and military officers (O4 and above).

Premier Choice Loans at Academy Bank

Find the Best Mortgage Loan with Academy Bank

Every homebuyer is different, and finding the right loan can make all the difference. No matter your stage in life or financial standing, there is a mortgage that’s just right for you. At Academy Bank, we are proud to offer each mortgage type listed above, along with special tools to help you make the best lending decision.

Ready to take the next step in your homebuying journey? Compare mortgage options and connect with our dedicated loan officers to find the best mortgage for your needs!

Compare Mortgages

 

MORTGAGE CALCULATORS:
Mortgage Loan Comparison Calculator
Mortgage Qualifier Calculator
Mortgage APR Calculator
Mortgage Payoff Calculator
Mortgage Tax Calculator
Conventional Mortgage Rate Calculator
FHA Rate Calculator
Refinance Savings Calculator