11 Common Types of Home Loans for Buyers and Owners

Like snowflakes, no two home buyers—or homeowners—are exactly alike. That’s why the U.S. mortgage market offers a variety of home loans to fit different needs, whether you’re buying your first fixer-upper, refinancing a suburban gem, or tapping equity for a big project. Each loan type comes with its own perks and pitfalls, so picking the right one for your situation is crucial. In this guide, we’ll break down the basics—fixed-rate vs. adjustable-rate mortgages (ARMs), conforming vs. nonconforming loans—then dive into 11 common home loans, from conventional to government-backed options and loans for current owners. Let’s get started.

Fixed-Rate vs. Adjustable-Rate Mortgages

Your mortgage interest rate shapes your monthly payment—and your financial peace of mind. Rates in 2025 (hovering around 6%–7% after 2024 Fed adjustments) depend on market trends, your lender, and your credit score. The big question: will that rate stay put or shift? Here’s the rundown.

Fixed-Rate Mortgages

A fixed-rate mortgage locks in your interest rate for the entire loan term—typically 10, 15, 20, or 30 years. Your payment stays steady, even if market rates soar. Early on, more of your payment tackles interest than principal, but it evens out over time.

Key Factors: Rate and term length. A 15-year at 6% on a $300,000 loan costs $2,531/month—steep but builds equity fast. Stretch it to 30 years, and it’s $1,799/month—easier on the wallet but slower equity growth.

Best For: Budget planners who hate surprises. In 2025, with rates stabilizing, fixed is a safe bet.

Adjustable-Rate Mortgages (ARMs)

An ARM starts with a low introductory rate for a set period (e.g., 5 years), then adjusts based on market indexes like SOFR. Most are 30-year loans, with adjustments yearly (e.g., 5/1 ARM) or every 6 months (e.g., 7/6 ARM).

Example: A 5/1 ARM at 5.5% on $300,000 starts at $1,703/month. Post-5 years, if rates hit 7%, it jumps to $1,996. Caps (e.g., 2% per adjustment) limit shocks.

Best For: Buyers planning to sell or refinance before the intro ends—say, in a hot market like Austin. Riskier if you stay long-term.

Conforming vs. Nonconforming Loans

Most U.S. mortgages fall into two buckets: conforming or nonconforming, based on Fannie Mae and Freddie Mac rules.

Conforming Loans

These meet Fannie and Freddie’s standards—think loan size, credit, and down payment rules. They’re bought by these agencies, bundled into mortgage-backed securities, and sold to investors. In 2025, the limit’s $766,550 in most areas, up to $1,149,825 in high-cost spots like San Francisco.

Nonconforming Loans

These break the mold—either too big (jumbo) or backed by government agencies (FHA, VA). Riskier for lenders, they often demand stricter terms or unique eligibility.

11 Common Types of Home Loans

Here’s your guide to the 11 most popular loans for buying or owning a home, updated for 2025.

Conforming Loans

1. Conventional Loans

What It Is: The U.S.’s most common mortgage, offered by banks, credit unions, and lenders like Rocket Mortgage. Can be fixed or ARM.

Requirements: 20% down recommended (e.g., $80,000 on $400,000), PMI if under (adds $50–$200/month), 620+ credit, DTI ≤ 45%, stable income.

2025 Limits: $766,550 standard, $1,149,825 high-cost areas.

Best For: Solid earners with good credit—like a teacher saving for years. Rates around 6.5% now.

Pros: Flexible terms, negotiable rates.
Cons: PMI hikes costs below 20% down.

2. High-Balance Conventional Loans

What It Is: Conforming loans above standard limits in pricey areas (e.g., LA, NYC), backed by Fannie/Freddie.

Requirements: Same as conventional—20% down ideal, 620 credit, 45% DTI.

Best For: Buyers in high-cost markets needing $800,000+ without going jumbo.

Pros: Higher limits, still conforming perks.
Cons: Limited to specific counties.

Nonconforming Loans

3. Jumbo Loans

What It Is: Big loans exceeding FHFA limits—$766,550+ in 2025—for luxury homes or hot markets.

Requirements: 10%–20% down (e.g., $150,000 on $1.5M), 700+ credit, DTI ≤ 43%, hefty reserves.

Best For: High earners buying in Miami or Seattle. Rates 6.75%–7.25%.

Pros: Funds dream homes.
Cons: Tougher approval, higher rates.

4. Interest-Only Loans

What It Is: Pay just interest for 5–10 years, then principal + interest (often ARM).

Requirements: Good credit (680+), 20% down, strong income.

Best For: Flippers or short-term owners expecting income jumps.

Pros: Low early payments (e.g., $1,250 vs. $1,799 on $300,000 at 5%).
Cons: No equity early, rate hikes later.

5. Balloon Loans

What It Is: Low payments for 5–7 years, then a massive final “balloon” payment.

Requirements: 720+ credit, low DTI, 20% down.

Best For: Investors planning to sell—like a Denver flipper.

Pros: Cheap monthly costs ($1,000 vs. $1,799 on $300,000).
Cons: Huge payoff (e.g., $270,000 due).

Money Fact: Interest-only and balloon loans are flipper favorites—buy, fix, sell, profit.

Government-Backed Loans

6. FHA Loans

What It Is: Backed by the Federal Housing Administration for low-down-payment buyers. Primary residence only.

Requirements: 3.5% down (580+ credit), 10% (500–579), UFMIP (1.75%), annual MIP (0.45%–0.85%). 2025 limit: $498,257 (low-cost areas), $1,149,825 (high-cost).

Best For: First-timers with spotty credit.

Pros: Low down (e.g., $10,500 on $300,000), lenient credit.
Cons: MIP forever unless 10%+ down, lower caps.

7. USDA Loans

What It Is: U.S. Department of Agriculture loans for rural homes, 0% down.

Requirements: Rural area, DTI ≤ 41%, income ≤ 115% area median, primary residence.

Best For: Rural buyers in places like Idaho.

Pros: No down payment, low rates (6% range).
Cons: Location and income limits.

8. VA Loans

What It Is: Department of Veterans Affairs loans for military members, veterans, and spouses—100% financing.

Requirements: Certificate of Eligibility, DTI ≤ 41%, funding fee (1.4%–3.6%).

Best For: Eligible vets—like a Navy vet in Virginia.

Pros: 0% down, no PMI, high limits.
Cons: Military-only, funding fee.

Homeowner Loans

9. Second Mortgages

What It Is: Loans against home equity—either fixed (home equity loan) or revolving (HELOC).

Requirements: 20%+ equity, 680+ credit. Rates 7%–8% in 2025.

Best For: Reno cash or debt payoff.

Pros: Lower rates than credit cards (8% vs. 20%).
Cons: Risky if values drop.

10. Reverse Mortgages

What It Is: For 62+, borrow against equity, repay when you sell/move/die.

Requirements: Age 62+, own home mostly outright, counseling session.

Best For: Retirees needing cash—like a Florida snowbird.

Pros: No payments now, stay home.
Cons: High fees (2%+), less inheritance.

11. Bridge Loans

What It Is: Short-term (6–12 months) loan to buy before selling.

Requirements: 20% equity, 620+ credit, low DTI. Rates 8%–10%.

Best For: Moving up—like from a starter to a family home.

Pros: Timing flexibility.
Cons: Costly, dual payments.

Know Your Options Before You Dive In

With 11 loan types—from FHA’s 3.5% down to jumbo’s million-dollar reach—there’s a mortgage for every buyer and owner in 2025. Rates are settling (6%–8%), but each loan’s quirks matter. Conventional suits the prepared, government-backed helps the underserved, and owner loans unlock equity. Talk to a mortgage pro to match your goals—whether it’s a fixed-rate sanctuary or an ARM adventure. Your home loan journey starts here.