There’s no one type of home loan that can be considered the best. The whole point of a home loan is to make buying your home affordable. So let’s take a look at the different types of home loans and understand their differences.

Conventional Mortgage

This is a popular choice. The rates are great, and there are several down payment options and flexible terms. They’re also called conforming loans. Most lenders across the U.S. offer these at competitive rates. The rates are proportional to your credit score and down payment. So if your finances are strong, your terms will be better.

FHA Loan

First-time homebuyers usually prefer this loan. The highlights are small down payment requirements, very lenient credit score standards, and flexible income guidelines and terms of 15 to 30 years. But this home must be your primary residence.

VA Loan

Homebuyers with eligible military service history can qualify for a 100% loan (zero-down) backed by the U.S. Department of Veteran Affairs. These are thought to be the best mortgages as their rates are low, and no monthly mortgage insurance is needed.

USDA Mortgage

It’s meant for low- to moderate-income homebuyers who will live in rural and suburban areas. It eliminates down payment and offers low-interest rates and reduced mortgage insurance costs.

Jumbo Loan

These non-conforming loans offer to finance up to $2 million or more. Their rates are close to lower than conventional loan rates. But you will need a strong credit score for approval and to qualify for the lowest interest rate. Jumbo loans are meant for high-cost areas where real estate values have soared.

FHA 203 K Rehabilitation Loan

This is great if you’re buying an older or ‘fixer-upper’ home. This loan allows you to buy a home as-is and borrow enough to repair it. Buyers usually gain a lot of equity in the process. Credit score requirements and income eligibility are lenient too.

Adjustable-Rate Mortgage

This works if you’re planning to live in your home for less than ten years. Introductory rates are low, and the rate is often fixed for five to ten years. ARMs also have caps that limit the amount of the increase in rates.