What Type of Mortgage Should You Get When Buying a House?

If you’re planning to apply for a mortgage, you have three options to choose from: conventional loans, FHA loans, and VA loans. Each one has its own advantages and disadvantages, so it’s best to read through their differences to see what works best for you. 

What is a Conventional Loan?

A conventional loan is not backed or insured by the government, so it will usually have a fixed interest rate. You also have a set of terms that will be agreed upon before signing anything. 

If you have good credit, you’ll find that this is arguably the most popular type of loan to go for. Those with lower credit standing may still qualify for this type of loan, but this is highly dependent on their specific situation and the institution they choose to borrow from. For this type of loan, a borrower will only need to pay for a mortgage insurance premium if they are putting down less than twenty percent. 

If a borrower’s balance drops down to eighty percent of the home’s value, a conventional loan allows cancellation of mortgage insurance. This type of loan is usually recommended if you have great credit, want the lowest interest rates, and can afford to pay twenty percent for a down payment, so you can nix the mortgage insurance.

What is an FHA Loan?

The Federal Housing Administration (FHA) loan is insured by the aforementioned administration. They don’t actually lend the money, but they qualify lenders for mortgage defaults. 

Though the FHA loan still has criteria for approval, it has more flexible lending standards. FHA loan borrowers can spend up to fifty-seven percent of their income on monthly debt obligations, including their mortgage. This is higher than the conventional cap.

FHA loans have two premiums for mortgage insurance – an annual premium depending on the lender and an upfront premium worth 1.75 percent of the total amount of the loan. You’ll only pay the latter at closing, though.

The common practice for this loan is to have long-haul mortgage plans with small down payments (around five percent or less). So, people with lower credit scores, refinancers who have small equity, and individuals who want a small down payment will most likely go for this. 

What is a VA Loan?

A loan from the Department of Veterans Affairs (VA) is, again, not actually a loan from the department. Instead, they ensure qualified lenders in the event that a borrower defaults. 

This is mostly catered toward veterans, though spouses of service members may also be eligible with some requirements. Although the VA loan doesn’t guarantee the full amount upon lending, they also don’t require borrowers to pay for mortgage insurance. If the borrower is buying a property as their primary residence, they also don’t need to put down a down payment.

Borrowers will mostly think about closing costs and the upfront funding fee which can be rolled into the loan. This usually goes around one to three percent of the total and can be paid by the seller. This is a great option for those with poor credit scores and have served in some capacity.


If you are already in talks with a mortgage broker, they can help you figure out which loan might be the best fit for your budget and goals. There is no one correct answer since the best choice is really dependent on your own preferences and how your broker helps you strike a deal. 

If you’re in need of a mortgage broker in Sacramento, Hawkins Home Loans is your online resource for a stress-free process with incredibly low rates and amazing service. Reach out now to get started.