Every major mortgage type, explained in plain language

Before you fall in love with a house, it helps to understand the money that buys it. Buyers hear a stream of loan jargon (conventional, conforming, jumbo, FHA, ARM) and most of it never gets defined. Here is the whole landscape in one place, in plain language.

One thing first: I’m a REALTOR, not a lender. This is the orientation I give clients so lender conversations make sense, not a loan recommendation. The right structure for you comes out of a conversation with a good loan officer, and I’m happy to introduce you to several.

The two big sorting questions

Every mortgage gets sorted two ways:

Who stands behind it. Conventional loans follow rules set by Fannie Mae and Freddie Mac. Government-backed loans (FHA, VA, USDA) carry a federal guarantee that lets lenders accept smaller down payments or lower credit scores.
How the rate behaves. Fixed-rate loans keep one rate for the whole term. Adjustable-rate mortgages (ARMs) start fixed, then adjust on a schedule.

Everything below is a combination of those two answers.

Conventional loans

The workhorse. No federal guarantee, underwritten to Fannie and Freddie standards. First-time buyers can qualify with as little as 3% down, though anything under 20% adds private mortgage insurance (PMI) to the monthly payment until you build enough equity to remove it.

Within conventional there’s a split that matters a lot here:

Conforming means the loan amount fits under the Federal Housing Finance Agency’s annual limit. For 2026 the baseline is $832,750, and high-cost counties get more. Santa Clara and San Mateo counties sit at the national ceiling of $1,249,125. The FHFA map has the current number for every county, and it changes each January.
Jumbo means the loan exceeds that limit. Jumbo loans are common in the Bay Area for obvious reasons. They typically ask for stronger credit, bigger reserves, and sometimes a larger down payment. Pricing can be better or worse than conforming depending on the lender and the market, which is one more reason to shop more than one lender.

FHA loans

Insured by the Federal Housing Administration. The headline: 3.5% down with more forgiving credit requirements than conventional. The trade-off: FHA charges an upfront mortgage insurance premium plus a monthly one, and on most modern FHA loans the monthly premium stays for the life of the loan unless you refinance out of it.

FHA can be the right bridge for a buyer whose credit is rebuilding. In practice, many Bay Area buyers who qualify for FHA also qualify for a 3% down conventional loan, and the conventional version often costs less over time. Run both. FHA loan limits are also county-based, and FHA appraisals apply stricter property condition standards, which matters when you’re offering on older housing stock.

VA loans

For veterans, active-duty service members, and some surviving spouses: zero down payment, no monthly mortgage insurance, and competitive rates. This benefit is strong enough that I wrote it its own article. If you served, start there before you assume anything about what you can afford.

USDA loans

Zero-down loans for homes in USDA-designated rural areas, with income caps. Almost nothing in Santa Clara County or the Peninsula qualifies geographically, but buyers looking at the far edges of the region (parts of Morgan Hill, Gilroy, and beyond) occasionally can. Worth a map check if you’re shopping the southern edge of the county.

Fixed-rate loans

One rate, one payment, for the entire term. The 30-year fixed is the default American mortgage because the payment never surprises you. A 15-year fixed carries a lower rate and dramatically less lifetime interest in exchange for a meaningfully higher monthly payment. There are 20-year and 10-year versions too. The trade is always the same: shorter term, higher payment, less total interest.

Adjustable-rate mortgages (ARMs)

An ARM starts with a fixed period, then adjusts. The naming tells you the schedule: a 7/6 ARM is fixed for seven years, then adjusts every six months, tied to a published index plus a fixed margin. Caps limit how much the rate can move at the first adjustment, at each adjustment after that, and over the life of the loan. Ask your lender for all three cap numbers and the worst-case payment. Any good lender will show you without being asked.

ARMs earn their keep when the initial rate is meaningfully below the 30-year fixed and you have a realistic reason to believe you’ll sell or refinance inside the fixed window. They are a calculated bet, not a trick, but you should know exactly what the bet is.

The ones you’ll hear about less often

Interest-only loans. You pay only interest for an initial period, so the payment is low but the balance doesn’t shrink. Mostly a jumbo product for buyers with irregular high income. Requires discipline.
Bank statement and other non-QM loans. For self-employed buyers whose tax returns understate their real cash flow. Lenders qualify you on bank deposits instead. Rates run higher; sometimes it’s the only door in, and refinancing later is common.
Bridge loans. Short-term money that lets you buy before you sell. Expensive, useful in specific move-up situations. We talk about this in the playbook’s contingency discussion.
Assumable loans. FHA and VA loans can be assumed by a qualified buyer, meaning you take over the seller’s existing rate. When prevailing rates are high and the seller locked something low years ago, an assumption can be extraordinary. They’re slow and lender-dependent, but always worth asking about.

How to actually choose

Get fully underwritten by at least two lenders, compare the loan estimates line by line, and pick the structure that fits how long you actually expect to own the home. The cheapest rate is not always the cheapest loan. If you want help reading the estimates side by side, that’s a normal part of what I do with clients, and the playbook walks through where financing sits in the overall sequence.

Questions about how any of this applies to your situation? Ask me. If I don’t know the answer, I know which lender will.