Which Loan Program Is Right for You? Conventional vs. FHA vs. VA vs. USDA

Most US buyers will be choosing between four mortgage programs: Conventional, FHA, VA, and USDA. They aren't tiers of quality — they're built for different borrowers. Two of them have eligibility gates you either pass or don't, and the other two trade credit flexibility against long-term cost. Picking the right one can change your monthly payment by hundreds of dollars and your maximum purchase price by tens of thousands.

Conventional: the default for solid credit and stable income

Conventional loans aren't government-insured; they follow guidelines set by Fannie Mae and Freddie Mac. They're generally the best value when your file is strong.

Who it's for: credit around 620 and up (pricing improves sharply above 740), documented stable income, and a manageable debt load.
Down payment: 3% for many first-time buyers, typically 5% or more otherwise, 20% to avoid mortgage insurance.
DTI: plan around 28% front-end / 36% back-end; automated underwriting stretches higher with strong reserves or credit.
Mortgage insurance: PMI below 20% down — but it's cancellable at 20% equity and terminates automatically at 22%.
Best when: your credit is good, you plan to stay in the home long enough for PMI to fall off, or you're buying a second home or rental (the only program here that allows it).

FHA: built for lower credit scores and thinner savings

Insured by the Federal Housing Administration, FHA exists to make ownership reachable for borrowers Conventional underwriting would price out or decline.

Who it's for: credit scores as low as 580 (500–579 with 10% down), higher debt loads, past credit events, or borrowers rebuilding after a bankruptcy or foreclosure.
Down payment: 3.5% with a 580+ score.
DTI: up to roughly 43% back-end, and higher on manual underwrites with compensating factors.
Mortgage insurance: 1.75% upfront MIP financed into the loan, plus about 0.55% annually — and with less than 10% down, that annual premium lasts the life of the loan.
Best when: you can't get a Conventional approval today. Many FHA borrowers refinance to Conventional in a few years to shed MIP.

One more constraint: FHA has minimum property condition standards, and the appraiser flags health and safety issues that must be repaired before closing. That can make FHA offers harder on fixer-uppers and in competitive bidding situations.

VA: usually the best deal available, if you're eligible

Guaranteed by the Department of Veterans Affairs and open to qualifying veterans, active-duty service members, National Guard and Reserve members, and some surviving spouses.

Who it's for: anyone with a valid Certificate of Eligibility based on qualifying service.
Down payment: 0% on most purchases, with no statutory loan limit for borrowers with full entitlement.
DTI: guideline around 41%, but VA also applies a residual income test that can support approvals well above it.
Mortgage insurance: none. Ever. Instead there's a one-time funding fee of roughly 1.25%–3.3%, financed into the loan — and waived entirely for veterans receiving VA disability compensation.
Best when: you're eligible. No monthly mortgage insurance plus competitive rates usually beats every alternative. The benefit is reusable, and the loan is assumable by a qualified buyer.

VA loans are for primary residences and have their own appraisal standards. If you're eligible and a lender steers you toward FHA without pricing VA, get a second opinion.

USDA: 0% down, tied to the property and your income

The USDA Guaranteed Loan program supports buyers in rural — and, in practice, many suburban — areas.

Who it's for: buyers of primary residences in USDA-eligible areas whose household income is within the county limit (commonly 115% of area median income).
Down payment: 0%.
DTI: around 41% back-end, often paired with a 29% housing ratio.
Mortgage insurance: about 1% upfront guarantee fee financed in, plus roughly 0.35% annually — the cheapest ongoing fee of any low-down-payment program.
Best when: the home is in an eligible area and you're under the income cap. Two gates, but the economics are excellent if you clear them.

The eligibility map is address-specific and broader than most people expect. It's worth checking a specific property rather than assuming your area doesn't qualify.

How to narrow it down quickly

Eligible for VA? Start there and make another program prove it's cheaper.
Property in a USDA area and income under the cap? Price USDA against Conventional.
Credit 700+ with modest debt? Conventional is usually the lowest lifetime cost, even at 3–5% down, because PMI ends.
Credit under 660, or a high DTI? FHA is likely the path to approval — treat it as a starting loan, not a permanent one.
Buying a rental or second home? Conventional is the only option of the four.

Why this decision belongs with a broker

Program fit isn't a preference — it's an underwriting outcome that depends on your credit profile, income documentation, the property, and how long you plan to keep the loan. A licensed loan originator can run the same application through multiple programs, compare the real all-in monthly cost including mortgage insurance, and tell you where the approval is strongest before you make an offer. On Mortvio, the brokers you're matched with are NMLS-registered and licensed in the state where you're buying, and you'll see which programs each one actually specializes in.