Conventional Loan
- Not insured or guaranteed by a government program
- Some programs allow as little as 3% down
- PMI is required under 20% down, but it ends
Every mortgage, explained in plain English
FHA, VA, USDA, ARM, PMI — the names pile up fast, and it can sound like you need a decoder before you can even ask a question. You don't. Every mortgage comes down to three choices, and we'll walk you through all of them.
5 programs
conventional, FHA, VA, USDA, and jumbo
3 choices
the program, the term, and the rate structure
More than one fit
most buyers qualify for several — that's normal
The Basics
Every mortgage is three choices
Start with three things: the loan program, how long you'll repay it, and whether the rate is fixed or adjustable. Everything else — the paperwork, the acronyms, the fine print — hangs off those three decisions.
Then compare four things across your options: what you qualify for, how much cash you'll need, the monthly payment, and the total cost over the years you actually expect to keep the loan. You may have more than one good option. That's normal, and it usually means you have room to negotiate.
The program
Sets the basic rules: your eligibility, down payment, mortgage insurance, fees, property requirements, and borrowing limit.
The term
How long you have to repay. A shorter term usually means a higher monthly payment but less interest overall. A longer term flips that.
The rate structure
Fixed keeps your principal and interest the same for the life of the loan. An adjustable rate can start lower, then move up or down later.
The Main Programs
Compare the main mortgage programs
Four programs cover most home purchases. Jumbo and specialized loans come into play when the property, loan amount, or project doesn't fit the usual guidelines.
FHA Loan
- Down payment as low as 3.5%
- More forgiving of a thinner credit profile
- Not just for first-time buyers, despite the myth
VA Loan
- For eligible Veterans, service members, and surviving spouses
- No down payment and no monthly mortgage insurance
- A one-time funding fee may apply — some are exempt
USDA Loan
- Up to 100% financing on an eligible primary residence
- Depends on household income and property location
- "Rural" covers more places than you'd expect
Jumbo Loan
- For loan amounts above the conforming limit
- Guidelines vary by lender, not by a national rulebook
- Expect a strong credit profile and documented reserves
Close to the conforming limit?
A small change in your down payment or loan amount can move you between programs. Ask us to run both.
Run the numbersTerm and Rate Structure
How long, and does the rate move?
Once you know your program, two choices shape the payment: how many years you take to repay, and whether the rate is locked or adjustable. Most buyers land on a 30-year or 15-year fixed. Today's ARMs are hybrids: the rate is fixed for an opening stretch, then adjusts on a schedule. That's the "5" in a 5/1 ARM.
| Feature | 30-Year Fixed | 15-Year Fixed | Adjustable Rate (ARM) |
|---|---|---|---|
| Interest rate | Locked for all 30 years | Locked for all 15 years, and usually a little lower than the 30-year rate | Fixed for an opening period of 3 to 10 years, then adjusts on a schedule within caps |
| Monthly payment | The lowest of the three | Noticeably higher, since you repay in half the time | Often the lowest at the start. It can rise or fall after the fixed period |
| Total interest over the loan | The most, because you borrow the money the longest | Far less. Often under half of what the 30-year costs | Depends on where rates go after the opening period |
| Equity building | Slow in the early years | Fast from the first payment | Matches a fixed loan during the opening period |
| Makes sense when | You want room in the monthly budget, or plan to invest the difference | You can carry the payment comfortably and want to own the home outright sooner | You expect to sell or refinance before the fixed period ends, and could handle a higher payment if you don't |
Second mortgage and HELOC
A second mortgage borrows against the equity you've built, as one lump sum with its own payment. A home equity line of credit (HELOC) works more like a credit card: draw what you need, when you need it, and pay interest only on what you use. Here's how people put that equity to work.
Bridge loan
Short-term financing that lets you buy your next home before your current one sells. It's repaid from the sale proceeds. Expect a higher rate and a firm deadline, so it suits a home you're confident will sell. A cousin of this is seller carry-back, where the seller finances part of the price and you repay them directly.
Buydown
A payment at closing, often from the seller or builder, that lowers your interest rate. A temporary buydown eases the first year or two. A permanent one lasts the life of the loan. We've written about how an extreme buydown works.
Piggyback loan
A first mortgage for 80% of the price plus a second loan for part of the rest. The common 80/10/10 version lets you put 10% down and skip private mortgage insurance. Compare the second loan's rate against the PMI you'd avoid before you decide.
Balloon loan
Smaller payments for a set number of years, then the whole remaining balance is due at once. It only works if you're sure you'll sell or refinance before that date. Read how a balloon mortgage works before you consider one.
Reverse mortgage
Lets homeowners 62 and older turn home equity into cash with no monthly mortgage payment. The loan is repaid when the home is sold or the owner moves out. Worth a careful conversation with family first. Start with what a reverse mortgage is.
The adjustable rate mortgage page covers index, margin, and caps in full. Most of the options above are tools for a specific situation, not everyday choices. If one sounds like yours, tell us the situation and we'll say whether it's worth pursuing.
Five Things That Decide It
What to compare, once you have real offers
A lower down payment or interest rate doesn't always mean a lower-cost loan. These five factors decide which offer is genuinely better for you.
Cash to close, not just the down payment
FHA may allow 3.5% down and some conventional programs allow less. Don't stop at the percentage. Closing costs, reserves, seller or lender credits, and eligible gift funds can move the cash you actually need just as much.
Mortgage insurance and how long it lasts
FHA always requires FHA mortgage insurance. Conventional requires PMI only when you put down less than 20%. The cost and the duration are not the same, and the difference compounds every month you hold the loan.
Credit and underwriting, not just the minimums
Published program minimums are not promises of approval. Lenders can add their own requirements, and your income, debts, assets, credit history, and the property itself all shape the offer you actually receive.
Loan limits and property rules
Every program has loan limits and property requirements, and FHA adds its own appraisal standards. The rules differ again for condos, multi-unit homes, and manufactured homes. Check the property before you fall in love with it.
Total cost over the years you'll keep it
Compare the rate, the annual percentage rate, mortgage insurance, lender fees, cash to close, and the projected cost over your real time horizon. The five-year cost printed on the Loan Estimate is the honest comparison.
How to Choose
Six questions that narrow it down fast
Start with the questions that affect your day-to-day life, not the ones that sound most technical.
Find out which programs you qualify for
Eligibility comes first — it rules options in and out before anything else.
Military service, household income, and property location can each open a door that saves you real money. It takes one conversation to find out which doors are open to you.
Decide how much cash you want to use
The down payment and closing costs together, not the percentage alone.
Emptying your savings to hit 20% is rarely the right call. Keeping reserves after closing can matter more than shaving a little off the monthly payment.
Name the monthly payment that feels comfortable
The full payment: taxes, insurance, mortgage insurance, and HOA dues included.
Lenders will often approve you for more than you'd enjoy paying. The number that matters is the one that still leaves room for the rest of your life.
Estimate how long you'll keep the home or the loan
Your time horizon decides whether upfront costs are worth it.
Paying points to buy down a rate pays off over a long hold and wastes money over a short one. Same loan, opposite answer, depending on this one number.
Be honest about payment uncertainty
Only relevant if you're considering an adjustable rate.
An adjustable-rate mortgage starts with a fixed period, then moves with its index, margin, and caps. It may start lower. Take it only if you'd still be comfortable when the payment rises.
Check the property against the program rules
The home has to qualify too, not just you.
Condos, multi-unit homes, and manufactured homes each follow different rules. And if a down-payment-assistance program is on the table, read whether it's a grant, a deferred loan, or a second mortgage you'll repay.
Common Questions
Questions we hear every week
Short answers to the ones that come up before anyone fills out an application.
Five come up most often: Conventional, FHA, VA, USDA, and Jumbo. Conventional is the most common and is not backed by a government program. FHA is insured by the government and is easier to qualify for. VA is guaranteed by the Department of Veterans Affairs for those who have served. USDA covers rural and suburban buyers who meet its guidelines. Jumbo is for loan amounts above the conforming limit.
Which one fits comes down to your down payment, your credit history, your military service, and where the home is. You do not have to work that out alone, and picking the wrong one is a common and expensive mistake.
More than one program looks like a fit?
That's usually good news. We'll price them side by side using your eligibility, your cash to close, and the payment you're actually comfortable with.
Let's Compare Your Options
Your Phoenix mortgage lender
A prequalification or preapproval gives you a clearer shopping budget. It isn't final approval — that depends on verified finances, the property, the appraisal, and the lender's review. But it turns a vague price range into a real one.
When you have real offers in hand, bring them to us. We'll compare the official Loan Estimates line by line and turn the mortgage rules into a clear picture built on your actual numbers.
A track record you can verify
2026 Scotsman Guide Top Originator
James Vercellino was listed among Scotsman Guide's 2026 Top Originators.