Types of Mortgages | Traditional and Non-Prime Loan Options

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Types of Mortgages: 2025 Guide to Choosing the Right Loan

Are you ready to buy a home but not sure which loan is right for you? You’re not alone. Picking the right mortgage can feel confusing—but it doesn’t have to be. In this guide, we’ll walk you through the most common types of mortgages in 2025 and help you determine which fits your life and budget.

At Gustan Cho Associates, we help people every day who thought they couldn’t get approved. Whether your credit is perfect or far from it, there’s a mortgage for you. Let’s break down your options.

What Are the Main Types of Mortgages?

There are many types of mortgages, but most homebuyers choose from these six:

Loan Type	Best For	Down Payment	Min. Credit Score	PMI Required?
FHA Loan	First-time buyers, low credit	3.5% (580 score)	580	Yes
VA Loan	Veterans and active military	0%	No minimum	No
USDA Loan	Rural areas, low-to-mid income	0%	640 recommended	Yes (low cost)
Conventional	Good credit, stable income	3–5%+	620	Yes <20% down
Jumbo Loan	High-value homes	10–20%+	700+ recommended	Usually
Non-QM Loan	Self-employed, bad credit	10–20%+	Flexible	No

FHA Loans – The Easiest Mortgage to Qualify For

FHA loans work well for first-time homebuyers. You can be eligible with a credit score of at least 580 and only a 3.5% down payment.That makes it easier for folks who don’t have a lot saved up or have had some financial bumps, like collections, late payments, bankruptcy, or foreclosure.

The whole point of this program is to help out borrowers, especially those who might struggle to get a yes from traditional lenders.

At Gustan Cho Associates, we help clients get FHA loans, even if their credit scores are below 620 and they have been denied by other lenders. We want to help more people achieve their dream of owning a home, no matter their financial history.

VA Loans – 0% Down for Veterans and Military

VA loans are often considered the best mortgage option for service members because of their awesome terms and perks. One of the coolest things about VA loans is that you don’t need a down payment, making it easier for veterans and active duty folks to buy a home. Plus, you can skip the mortgage insurance, which can really help save a chunk of money over time.

On top of that, VA loans usually come with super-low interest rates, making them even more affordable.

To get a VA loan, you need to be an active duty service member, veteran, or an eligible surviving spouse, and you’ll need a Certificate of Eligibility (COE). There’s no strict minimum credit score for these loans, but most lenders tend to look for a score of 580 or higher. At Gustan Cho Associates, we’re all about helping veterans get their loans, even if other lenders have turned them down before. We’re here to support those who’ve served our country in reaching their homeownership dreams.

USDA Loans – Zero Down Payment for Rural Locations

USDA loans are perfect for homebuyers in small towns or rural areas. You can buy with 0% down, but there’s a household income cap to qualify.

Good for:

• Families with moderate income
• Buyers in USDA-approved rural zones

You must meet the area’s income limits and property location rules to qualify. These types of mortgages are great for first-time homebuyers who want a low-cost loan with flexible terms.

Conventional Loans – Best for Good Credit Borrowers

Conventional loans are the most common type of mortgage in the U.S. They are usually backed by Fannie Mae or Freddie Mac. These loans offer good terms, especially for borrowers with strong credit. Typically, a 620 or above credit score is required.

First-time buyers can snag a conventional loan with a 3% down payment. Repeat buyers usually must make a down payment of at least 5%. If you put down less than 20%, you must get private mortgage insurance (PMI). However, you can remove this insurance later when you have enough equity in your home.

Conventional loans are flexible. They allow you to buy second homes and investment properties, which is impossible with FHA, VA, or USDA loans.

Jumbo Loans – For Homes Above $766,550

If the home you want costs more than the 2025 loan limit of $766,550 (in most areas), you’ll need a jumbo loan.

What to expect:

• Higher down payment (10–20%+)
• Strong credit (usually 700+)
• Lower debt-to-income ratio (DTI)

Jumbo loans are common in high-cost markets like California, New York, and Florida. Because the loan amounts are higher and riskier for lenders, these types of mortgages come with stricter rules. Gustan Cho Associates has traditional and non-prime jumbo loans for our borrowers.

Non-QM Mortgages – Flexible Options for Self-Employed or Credit-Challenged Borrowers

Non-QM loans (non-qualified mortgages) are not backed by Fannie, Freddie, FHA, or VA—but that’s exactly why they’re flexible.

Ideal for:

• Self-employed borrowers using bank statements or P&L
• Buyers with recent credit events (bankruptcy, foreclosure)
• High DTI ratios or no tax returns

No tax returns, no problem. You can qualify based on bank deposits, asset depletion, or even a CPA letter for income. These types of mortgages have helped thousands of borrowers get approved at Gustan Cho Associates—even after being denied elsewhere.

Traditional and Non-Prime Jumbo Mortgage Options

We have shared some useful links on traditional versus non-prime jumbo mortgages below:

• FHA and VA High-Balance Jumbo Loans in High-Cost Areas
• High-Cost Conforming Loans in High-Cost Areas
• 90 LTV Jumbo Mortgages
• non-QM Jumbo Mortgages
• Bank Statement Loans for Self-Employed Borrowers
• Self-Employed Borrowers Mortgages
• Jumbo Loans With Low Credit Scores

Why Do Mortgage Types Matter?

Choosing the right loan affects:

• Your interest rate
• How much you pay monthly
• How much you need to save for a down payment
• Whether you’ll need mortgage insurance

Not all lenders offer every type. Some have overlays or extra rules that make qualifying harder. That’s where Gustan Cho Associates stands out—we don’t add unnecessary overlays and offer all major types of mortgages.

What Are Lender Overlays?

Even if a government program like FHA says you can qualify with a 580 score, many lenders add overlays—like requiring a 620 or higher. This is a big reason why borrowers get denied.

Gustan Cho Associates follows agency guidelines only. No overlays. If HUD says 580 is OK, we’ll honor it. It’s why over 75% of our clients came to us after being denied elsewhere.

Smart Tips for Picking the Right Mortgage

Here’s how to pick the best fit for your situation:

1. Check your credit score – Know where you stand.
2. Look at your income – Can you show tax returns, or do you need bank statement options?
3. How much do you have saved? – Your down payment amount helps narrow down choices.
4. Are you a veteran or living in a rural area? – You might qualify for $0 down options.
5. Talk to a lender about all the programs. – Don’t limit your options.

We Make It Easy – Apply Now and Get Matched

At Gustan Cho Associates, we believe everyone deserves a shot at homeownership. Whether you need a low down payment loan, a mortgage with bad credit, or a creative option as a business owner, we’ll help you find the right loan.

We offer all types of mortgages and specialize in doing loans that other lenders won’t touch. If you’ve been denied, don’t give up. Let us help.

Borrowers who need a five-star national mortgage company licensed in 52 states with no overlays and who are experts on different types of mortgages, please contact us at 800-900-8569, text us for a faster response, or email us at alex@gustancho.com.

Take the First Step Toward Homeownership

Whether buying your first home or your fifth, understanding the different types of mortgages gives you the power to choose what’s right. Don’t settle for one-size-fits-all lenders. At Gustan Cho Associates, we customize the loan to fit you.

Ready to see what you qualify for? Apply now and get expert guidance.

Frequently Asked Questions About the Types of Mortgages:

Q: What are the Main Types of Mortgages?

A: The most frequent mortgage types include FHA, VA, USDA, Conventional, Jumbo, and non-QM loans. Each type is designed to meet various requirements, such as purchasing your initial home, accommodating low credit, or catering to self-employed individuals.

Q: Which Types of Mortgages are Best for First-Time Homebuyers?

A: FHA loans are a top pick for first-time buyers because they only need 3.5% down and allow lower credit scores. USDA and VA loans are also great if you qualify, mainly because they offer zero down payment.

Q: Can I Still Get a Mortgage if I have Bad Credit?

A: Yes! Some types of mortgages, like FHA or Non-QM loans, are made for people with lower credit scores. At Gustan Cho Associates, we help people who have been denied by other lenders.

Q: What’s the Difference Between Conventional and FHA Loans?

A: FHA loans are easier to get with low credit or small savings. Conventional loans are better for people with good credit and steady income. Both are popular types of mortgages with different rules.

Q: Are There Types of Mortgages with No Down Payment?

A: Yes! VA loans for veterans and USDA loans for rural homes allow 0% down. These types of mortgages help people buy homes without needing a lot of cash upfront.

Q: What are Non-QM Loans, and Who are They for?

A: Non-QM (non-qualified mortgage) loans are for people who don’t fit the usual lending rules. These mortgages are good for self-employed borrowers, folks with high debt, or those who can’t show tax returns.

Q: What is a Jumbo Loan, and When do I Need One?

A: You’ll need a jumbo loan if the home price is over $766,550 (in most areas). These types of mortgages are common in expensive markets and require strong credit and a bigger down payment.

Q: Why do Lenders have Different Rules for the Same Types of Mortgages?

A: Some lenders add extra rules called “overlays.” For example, FHA allows credit scores of 580, but some lenders ask for 620 or more. At Gustan Cho Associates, we don’t add overlays. We follow the official rules.

Q: How do I Know Which Mortgage Type is Right for Me?

A: Consider your credit, income, how much you have saved, and whether you’re a veteran or living in a rural area. Then, talk to a lender who offers all types of mortgages, like Gustan Cho Associates, to help you choose.

Q: Can I Get Approved if I’ve Been Turned Down Before?

A: Absolutely. Many of our clients came to us after being denied elsewhere. Because we offer many types of mortgages and don’t add overlays, we can often help when others can’t.

This blog about “Types of Mortgages | Traditional and Non-Prime Loan Options” was updated on June 2nd, 2025.