Conventional Loan Alternatives: What Are Other Types of Mortgages?

By
FACT-CHECKED
Published Aug. 19, 2022
A loan officer shows some alternative mortgage options to a client.l

A conventional loan could help you snag a great deal on a mortgage — as long as you qualify.

If you don’t meet the eligibility requirements for a conventional loan — or you don’t think it’s the right fit — then you should look into different types of home loans and explore alternative mortgage options.

Here’s a look at some of the biggest differences between conventional loans and government-backed mortgages:

Conventional Loans vs. Other Types of Mortgages

Type of RequirementConventional LoanFHA LoanVA LoanUSDA Loan
Minimum down payment5%, or 3% under special loan programs3.5%NoneNone
Minimum credit score620500NoneNone, but a score of 640 or higher is preferred
Mortgage insuranceRequired if you’re putting less than 20% downRequired for all loansOne-time VA funding fee instead of mortgage insuranceUpfront and annual guarantee fees instead of mortgage insurance

Conventional Loans vs. FHA Loans

FHA loans are backed by the Federal Housing Administration. This type of loan is geared toward people who don’t have good credit and can only afford a small down payment. However, if your credit score is on the higher end and you have at least 10% to 15% of the home purchase price saved for a down payment, then an FHA loan could wind up being more expensive for you than a conventional loan.

Conventional Loans vs. VA Loans

VA loans are guaranteed by the Department of Veterans Affairs. This type of loan is intended for eligible service members, veterans, and their surviving spouses. While VA loans require no down payment and no mortgage insurance, not everyone can qualify for this type of mortgage. Conventional loans, on the other hand, are widely available.

Conventional Loans vs. USDA Loans

USDA loans are backed by the Department of Agriculture. This type of loan can help low-income borrowers buy property in eligible rural areas. Unlike conventional loans, USDA loans may only be used in certain parts of the country. They also come with additional requirements, such as limits on the size and value of the property.

FAQ: Alternatives to Conventional Loans

Here are the answers to some frequently asked questions about conventional loans.

Ready for more learning?

Here’s some other helpful articles

Related Articles

**itsHome, a LMB Mortgage Services, Inc. company, is not acting as a lender or broker. The information provided by you to itsHome is not an application for a mortgage loan, nor is it used to pre-qualify you with any lender. If you are contacted by a lender or broker advertising within our network, your quoted rate may be higher depending on your property location, credit score, loan-to-value ratio, debt-to-income ratio, and/or other factors. itsHome does not offer its matching services in all states. This loan may not be available for all credit types, and not all service providers in the itsHome network offer this or other products with interest-only options. The information that we provide is from companies which itsHome and its partners may receive compensation. This compensation may influence the selection, appearance, and order of appearance on this site. The information provided by itsHome does not include all financial services companies or all of their available product and service offerings. We use cookies to track data and provide you with the best possible experience. By proceeding you consent to the use of these cookies. For more information, see our Privacy Policy.

itsHome, a LMB Mortgage Services, Inc. company NMLS #167283, www.nmlsconsumeraccess.org