Conventional, FHA, VA, and USDA Loans Side by Side

What Makes Each Loan Type Different

Most home purchases in the United States are financed through one of four loan programs: conventional, FHA, VA, or USDA. While all four fund the purchase of a home, they differ significantly in who can qualify, how much borrowers must put down, what insurance they carry, and what the total cost looks like over time.

Conventional loans are not backed by a government agency — they're issued by private lenders and typically sold to Fannie Mae or Freddie Mac. The other three are government-backed: the Federal Housing Administration (FHA) insures FHA loans, the U.S. Department of Veterans Affairs guarantees VA loans, and the U.S. Department of Agriculture supports USDA loans. That government backing is what allows each program to extend terms that private lenders wouldn't otherwise offer.

For a deeper look at how loan costs are structured, see our breakdown of a Loan Estimate.

Eligibility and Down Payment Requirements

Conventional loans typically require a minimum credit score of 620, though lenders often prefer scores of 700 or higher for the most competitive rates. Down payments can be as low as 3% through certain programs, but borrowers putting down less than 20% pay PMI until they reach sufficient equity.

FHA loans allow credit scores as low as 580 with a 3.5% down payment, or as low as 500 with a 10% down payment. They're a common entry point for first-time buyers. However, FHA loans carry both an upfront mortgage insurance premium (currently 1.75% of the loan amount) and an annual premium — which persists for the life of the loan if the down payment is below 10%. Learn how these costs compare in our guide to PMI and mortgage insurance premiums.

VA loans require no down payment and no mortgage insurance, but eligibility is restricted to qualifying veterans, active-duty service members, and some surviving spouses. A VA funding fee applies — typically 2.15% for first use with no down payment — though certain borrowers are exempt.

USDA loans also require no down payment and are available to buyers in USDA-designated eligible areas who fall within income limits (generally 115% of the area median income). They carry a 1% upfront guarantee fee and an annual 0.35% fee.

Cost Comparison and Long-Term Trade-Offs

Interest rates across loan types are influenced by market conditions, lender pricing, and individual borrower risk factors, so direct comparisons shift over time. That said, VA loans historically offer competitive rates because of the government guarantee, and FHA rates are generally close to conventional rates — though the added insurance cost often makes FHA more expensive over time for borrowers who could qualify for conventional financing.

Conventional loans become cost-efficient once a borrower has 20% equity, at which point PMI drops off automatically. FHA MIP (Mortgage Insurance Premium), by contrast, remains for the full loan term on most loans originated after June 2013 with less than 10% down — a meaningful long-term cost difference.

USDA loans offer low rates and minimal fees for eligible buyers, but geographic and income restrictions limit their reach. VA loans carry no monthly insurance cost, making them particularly valuable for long-term savings.

Once you've chosen a loan type, comparing lender offers becomes the next critical step. Our article on comparing lender offers covers what to look for beyond the interest rate.

Choosing the Right Fit for Your Situation

No loan program is universally superior — the right choice depends on your credit profile, available savings, military status, purchase location, and how long you plan to stay in the home. Buyers who qualify for a VA loan and intend to purchase within VA loan limits often find it the most cost-effective path. Buyers in rural areas with moderate incomes should investigate USDA eligibility before assuming a conventional or FHA loan is the only option.

For buyers who don't meet the thresholds for VA or USDA, the choice between FHA and conventional often hinges on credit score and available down payment. A borrower with a 680 credit score and 5% down may pay less over time with a conventional loan once PMI is factored out; a borrower with a 600 score and minimal savings may find FHA the more accessible path.

Understanding how your rate is structured over the life of the loan also matters. Our comparison of fixed-rate and adjustable-rate mortgages explains how rate type interacts with your loan program choice.

Before approaching lenders, consider getting pre-approved — not just pre-qualified. Our guide on pre-qualification vs. pre-approval explains why the distinction matters when making offers.

This article is for general informational purposes only and does not constitute financial or legal advice. Consult a licensed mortgage professional or financial adviser regarding your specific circumstances.