For most American households, the mortgage is the largest contract they will ever sign. The decision is made under time pressure, often by people who have not bought a home before, in a vocabulary designed to obscure rather than clarify. The result is that small differences in process — the lender shopped, the term selected, the points paid or not — translate into very large differences in lifetime cost.
This guide covers the main mortgage types, the trade-offs between them, and the half-dozen decisions that move the needle most.
The four mortgage types that cover most cases
Conventional loans. The default for buyers with good credit and 5 percent or more down. Sold to Fannie Mae or Freddie Mac, with conforming loan limits ($766,550 in most areas, higher in expensive markets). Best rates of any mortgage type for borrowers who qualify.
FHA loans. Government-backed loans designed for buyers with smaller down payments (3.5 percent and up) or lower credit scores (580 and up). Slightly higher rates than conventional, plus mandatory mortgage insurance for the life of the loan in most cases. Best for first-time buyers who cannot quite hit conventional requirements.
VA loans. For active-duty military, veterans, and qualifying spouses. Zero down payment required. No private mortgage insurance. Often the best deal available if you qualify, full stop.
Jumbo loans. Mortgages above the conforming loan limit. Required for higher-priced homes. Usually require 20 percent or more down, excellent credit, and substantial reserves. Rates are sometimes lower than conventional for very strong borrowers, particularly for portfolio loans held by private banks.
Indicative rates by mortgage type
| Loan type | 30-year fixed | 15-year fixed |
|---|---|---|
| Conventional | 6.49 – 7.99% | 5.89 – 7.24% |
| FHA | 6.74 – 8.24% | 5.99 – 7.49% |
| VA | 6.24 – 7.49% | 5.74 – 6.99% |
| Jumbo | 6.74 – 8.49% | 6.24 – 7.74% |
Rates above reflect well-qualified borrowers (740+ FICO, 20 percent down, full documentation). Your rate will likely be different.
30-year vs. 15-year
The thirty-year mortgage has lower monthly payments and costs vastly more in interest over the life of the loan. The fifteen-year mortgage has higher monthly payments, builds equity dramatically faster, and costs less than half the total interest. Consider a $400,000 mortgage at 6.5 percent (30-year) versus 5.9 percent (15-year):
- 30-year: $2,528 per month · $510,178 in total interest
- 15-year: $3,358 per month · $204,471 in total interest
The fifteen-year costs $830 more per month but saves $305,000 in lifetime interest. Whether that trade is worthwhile depends on the borrower's overall financial picture, marginal tax rate, and what else the marginal $830 a month would do.
You can always make extra principal payments on a 30-year mortgage to pay it off faster. You cannot make a 15-year mortgage payment more flexible if cash gets tight.
The refinance question
Refinancing makes sense when the new rate is at least 0.75 percent lower than the current rate and the borrower will stay in the home long enough to recoup closing costs (typically 2–3 percent of the loan balance). For most situations, that means staying at least three years.
Cash-out refinances — where you borrow more than you currently owe and take the difference in cash — are best evaluated against the alternatives: HELOC (home equity line of credit), home equity loan, or simply not borrowing. A cash-out refinance replaces your existing mortgage with a new larger one and resets the term, which is sometimes the right answer and sometimes not.
Ready to shop?
Below: our top picks for home mortgages, drawn from publicly available lender materials.
Top picks: home mortgages
The following lenders are highlighted based on a combination of advertised rates, fee structure, accessibility, and reputation. Inclusion does not constitute endorsement of any particular loan offer; all final terms depend on the lender's review of your specific application.
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Frequently asked questions
How much down payment do I need?
Conventional loans typically require 5–20 percent down. FHA requires 3.5 percent. VA loans can be 0 percent down for qualifying military buyers. The more you put down, the lower your rate and the lower your mortgage insurance costs.
Should I lock my rate?
Once you have an accepted offer on a home, locking your rate protects you from rate increases during closing. Most lenders offer 30, 45, or 60-day locks. Longer locks cost slightly more but provide more certainty in volatile rate environments.
What credit score do I need?
Conventional: 620+ minimum, 740+ for best rates. FHA: 580+ (or 500+ with 10% down). VA: most lenders want 620+. Jumbo: typically 700+, often 740+.
How long does the mortgage process take?
Typical timeline is 30–45 days from accepted offer to closing. VA and FHA loans sometimes take longer. Cash-out refinances are usually faster (20–30 days).
What is the difference between APR and interest rate?
Interest rate is the cost of borrowing alone. APR includes the interest rate plus other costs (origination fees, mortgage insurance, points). APR is the truer measure of total cost — always compare APR, not just rate.
Should I pay points?
Points (prepaid interest) lower your rate. Each point typically costs 1 percent of the loan and reduces rate by 0.25 percent. Worth it if you will keep the loan long enough to recoup the cost — typically 5+ years for most point-buying scenarios.