What Type of Mortgage Loan Should I Get? A Simple Way to Decide

The Question Almost Every Buyer Asks

"What kind of loan should I get?" is one of the first questions I hear from buyers in Chesapeake, Norfolk, Portsmouth and Virginia Beach. It makes sense. There are several loan types, everyone has an opinion, and the wrong fit can cost real money over time.

I'm a buyer's and seller's agent, not a lender, so I can't tell you what you qualify for. What I can do is give you a simple way to narrow it down, so your conversation with a lender starts in the right place. For a side-by-side table of every program, see my overview of special home loan programs in Virginia.

Step 1: Do You Have Military Service?

If you're a veteran, active duty, an eligible Guard or Reserve member, or an eligible surviving spouse, start by looking at a VA loan. For eligible borrowers, VA loans often allow no down payment and no monthly mortgage insurance, which is hard for other loans to match. Most borrowers pay a funding fee unless exempt.

In a military region like ours, this is often the first branch in the decision. My guide to VA loans in Hampton Roads covers the details, and VA vs. FHA helps if you're weighing both.

Step 2: Is the Home in a USDA-Eligible Area?

USDA loans can offer no down payment for moderate-income buyers in eligible areas. Location and household income both matter. Parts of the region outside the most built-up areas may qualify, so if you're open to a more rural location, it's worth checking. See USDA loans in Hampton Roads.

Step 3: Where Is Your Credit?

Credit is often the biggest factor between FHA and conventional. FHA loans typically allow more flexible credit requirements, which is why they're popular with buyers who are building or rebuilding credit. Conventional loans tend to reward stronger credit with better pricing and lower mortgage insurance.

If your credit is still developing, FHA may be a good place to start. If your credit is strong, conventional often comes out ahead. My comparison of FHA vs. conventional loans walks through it. And if your credit worry comes from a past eviction, read can I buy a house with an eviction? — it's usually more workable than people expect.

Step 4: How Much Can You Put Down?

Both FHA and conventional have low-down-payment options. Putting 20% down on a conventional loan avoids private mortgage insurance. With less down, the comparison comes down to how mortgage insurance works on each loan over the time you expect to keep it.

Don't forget closing costs on top of the down payment. My guide to how much cash you need to buy a house helps you plan, and Virginia Housing programs may help eligible buyers with down payment or closing costs.

Step 5: What Kind of Home Are You Buying?

The home matters too. FHA and VA have property condition standards, so a house that needs significant work may be harder to finance with them. Renovation loans exist for fixer-uppers; see should I buy a fixer-upper. Condos can have their own approval requirements depending on the loan type, and higher-priced homes can run into loan limits.

A Quick Way to Narrow It Down

This is a rough starting point, not a rule. Lots of buyers qualify for more than one option.

Compare Total Cost, Not Just the Down Payment

The lowest down payment isn't always the cheapest loan. Ask your lender to compare options side by side: rate, mortgage insurance or funding fee, upfront costs and the monthly payment, over the time you actually expect to keep the loan.

My mortgage calculator and home affordability calculator help you test numbers, and how much mortgage you'll be approved for explains how lenders look at income and debt. If you're thinking specifically about FHA or conventional, see should I get an FHA loan? and should I get a conventional loan?.

Let's Get You to the Right Lender

I work with several trusted local lenders and can connect you with one who'll lay out your options clearly. Getting pre-approved is the first step on my buyer's agent page, and first-time buyers can try the loan guide finder on my first-time homebuyers page. If this is your first home, see the best loan for first-time home buyers in Hampton Roads.

Reach out to me and we'll figure out your next step together.

This article is general information, not financial advice. Loan rules, mortgage insurance, credit requirements and pricing change and vary by lender, so confirm current details and your specific options with a licensed lender.