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What are the Four Types of Home Loans?

Applying for a Home Loan

What does the word “mortgage” even mean? A mortgage is an agreement between you and the lender to buy a home without having all of the cash to purchase it upfront. The agreement gives your lender the legal right to repossess your property if you do not pay.

How do you get a mortgage? The first step is to be preapproved. You’ll need a preapproval to be looked at as a serious buyer in today’s fluctuating market.
Getting preapproved up front tells you exactly how much purchasing power you have and allows you to look at homes within your price range.

Four Types of Home Loans


VA loans provide flexible, lower interest loans for active duty military families and veterans. There is no minimum down payment, mortgage insurance or credit requirement, and closing costs are normally capped. VA loans charge a funding fee depending on how large of a down payment you do or don’t make.

As of April 7, 2023, the funding fee for first use is 2.15% with 0 down, 1.5% with 5% down, and 1.25% with 10% down.


Conventional loans are not backed by the federal government and can be used for a primary home, second home, or investment property. Overall costs tend to be lower than other types of mortgages and you can pay as little as 3% down.

You must have a FICO score of 620 or higher and a debt-to-income ratio of no more than 43%.


These loans are backed by the Federal Housing Administration and help make homeownership possible for borrowers without a large down payment or a perfect credit report. 

You need a minimum FICO credit score of 580 with a 3.5% down payment or a score below 580 with 10% down.


USDA loans help borrowers with lower income to buy homes in rural, USDA-eligible areas. Some USDA loans do not require a down payment, but there are extra fees including an upfront fee of 1% of the loan amount and an annual fee.

15-year vs. 30-year mortgages

30-year mortgages are the most common mortgage type in the United States due to lower monthly payments, but did you know that a 15-year mortgage is an option?

A 15-year mortgage will have higher monthly payments, but significantly less interest paid over the life of the loan.

A 30-year mortgage will have a higher interest rate with a lower monthly payment. You’ll pay a much larger amount in interest over the years, but it will provide you with more financial flexibility in a lower payment.

EXAMPLE: 30-year-mortgage on a $320,000 house at 6.5% interest is a monthly payment of $2,023 without taxes, insurance, or possible HOA fees. Total interest would be $408,412 with interest over the term of the loan.

15-year-mortgage at 5.75% interest is a monthly payment of $2,657 w/o taxes, insurance, or HOA fees. Total interest: $158,316

Curious what home mortgage is right for you? Let’s break down your unique needs during a free consultation. Call or text 316-669-5272 to get started.

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