Flexible terms and features. A conventional mortgage can mean more options for how your loan is set up, including how long you’ll pay it off and how your interest rate works.
Potential for lower long-term costs. With good credit and a solid down payment, it may be possible to get a lower interest rate.
Option to remove mortgage insurance. Private mortgage insurance can be removed after you’ve paid down a portion of your loan with monthly payments over time or a large initial down payment.
Works for many home types. These loans can finance new construction homes and modern manufactured homes that meet a lender’s condition and home requirements.
HomeLearning and supportHome financingTypes of home loans: Finding the mortgage option that fits your goals
Types of home loans: Finding the mortgage option that fits your goals
Home financing
By Jenny C.May 8, 20257 min read
Buying a home is a big step. To begin, it’s helpful to understand the types of home loans that are available.
Most home loans fall into a few mortgage types built for different budgets, terms, and property needs. When you learn how home loans differ, financing becomes less about paperwork and more about selecting the loan type and lender that supports your goals.
Along the way, you’re going to have questions that a lender can help answer. From helping you review your finances to explaining which loan types are available, your lender works with you. Before sitting down with your lender of choice, here is a quick overview of mortgage loan types to help those conversations feel clearer.
Key takeaways:
Common mortgage options: Conventional, FHA, VA, USDA, and portfolio loans are all options you can explore with different benefits to each.
Working with a lending expert: A lender of your choice will help you compare loan types, explain eligibility, and guide you through the financing steps of homeownership.
Homes and loan types: Many site-built and modern manufactured homes can qualify for the same loan programs, depending on the lender, loan, and home requirements.
We’ll walk you through common mortgage types, so you can get a sense of what home loans are available and their benefits.
Below, find answers to:
What is a conventional loan?
What is an FHA loan?
What is a VA loan?
What is a USDA home loan?
What is a portfolio loan?
What is a conventional loan?
A conventional mortgage is one of the most common ways buyers finance a home. These loans are offered by private lenders like banks and credit unions.
Because different lenders offer conventional loans with competitive interest rates, down‑payment requirements, fees, or approval criteria, you have the freedom to compare multiple options and pick the loan that is the best match for you.
Who are conventional loans best for?
Buyers with steady income and good credit
Those able to make a down payment (often 3% or more)
Those buying a home that meets appraisal requirements and property standards
Higher credit requirements. Conventional loans often call for stronger credit scores than government-backed programs.
PMI when putting down less than 20%. A down payment below 20% typically comes with a monthly mortgage insurance charge.
Down payment expectations vary. Some lenders may require more than the minimum down payment based on your credit, debt, or finances.
Some home types may not meet conventional loan standards. Depending on the home you want, some restrictions on loan types could apply.
What are FHA loans?
FHA loans are government-backed mortgages insured by the Federal Housing Administration. They offer a more accessible starting point than some other mortgage loan types, because they allow lower down payments and more flexible credit guidelines. That makes FHA loans a strong, supportive option for many first-time buyers.
Who is an FHA loan good for?
First-time buyers
Buyers needing a smaller down payment
Those with limited savings or newer credit
Potential for lower down payments. Buyers with credit scores of 580 and up may be able to put down as little as 3.5%.
More flexible credit guidelines. Some FHA lenders may accept credit scores as low as 500, subject to higher down payments and additional requirements, which helps qualified buyers who may be establishing or rebuilding credit.
Consistent standards. Clear program rules make it easier to compare lenders.
Works for some modern manufactured homes. FHA loans for manufactured homes are possible for properties meeting HUD and foundation standards.
Mortgage insurance is required. FHA loans require both upfront and monthly mortgage insurance premiums, which add to your total costs over time.
Lower loan limits in some areas. FHA sets a maximum amount you can borrow in each county, which may be lower than conventional loan limits.
What are VA loans?
VA loans are government-backed mortgages for qualifying veterans, active-duty service members, and surviving spouses that offer meaningful benefits, like no down payment or PMI. VA loans can be applied to site-built homes or eligible modern manufactured homes, often requiring land ownership and foundation standards. A VA-approved lender can help you explore if this type of loan is a good option for your home purchase.
Who are VA loans best for?
Veterans, active-duty service members, and eligible surviving spouses
Buyers who want a no–down payment option
Borrowers seeking lower monthly costs without PMI
No down payment for most qualifying buyers. Many VA loans allow 100% financing, reducing upfront home buying costs.
No PMI. VA loans do not require private mortgage insurance, helping keep monthly payments lower and reduce total loan costs.
Competitive rates. Interest rates are often lower than those for other kinds of home loans, supporting long-term affordability.
VA funding fee. Most borrowers pay a funding fee, which helps support the program but adds to the total loan costs.
Property standards apply. Homes must meet VA appraisal and condition requirements, which may rule out certain properties.
Eligibility is limited. Only buyers with qualifying military service or status can use the benefit.
What are USDA loans?
A USDA house loan is a government-backed mortgage insured by the U.S. Department of Agriculture. It’s designed to help buyers purchase a home in eligible rural or certain suburban areas. These loans are offered through approved USDA lenders, and qualification depends on your household income and the property’s location. A lender familiar with USDA guidelines can help confirm whether a home or area meets the program requirements.
Who are USDA loans best for?
Buyers looking in eligible rural or certain suburban areas
Households that meet USDA income limits
Buyers who want a zero–down payment option
No down payment for most eligible buyers. USDA loans often allow 100% financing, helping to lower upfront costs.
Lower long-term costs. Competitive interest rates can help keep your payments manageable over time.
Consistent program rules. With consistent program rules, it’s simpler for you to compare lenders and understand your options.
More options in rural areas. USDA loans can help you consider homes in rural and some suburban areas you may not have thought were within reach.
Homes must fall within eligible areas. Because USDA loans are location-specific, you’ll need to check whether a home you want is in a qualifying area.
Income requirements. The USDA house loans program sets income limits for each county, which may affect whether you qualify.
Upfront and monthly fees. Guarantee fees add to the cost of your loan over time.
More limited home types. Properties must meet USDA condition and appraisal standards, and some home types may not qualify.
What are portfolio loans?
A portfolio loan is a mortgage loan that a lender keeps after origination instead of selling it to investors, giving them more flexibility in setting approval guidelines. Portfolio lenders look at your full financial picture and consider your credit profile, your down payment, and whether land is part of the purchase. Some programs can finance a home by itself or a home with land. They may even allow you to use the value of land you already own toward your down payment if you qualify.
Who are portfolio loans best for?
Buyers who are self-employed or have nontraditional income
Those buying homes or home-and-land packages that may not meet other loan program requirements
Anyone who wants to stay with the same lender for the life of the loan
Flexible approval guidelines. Lenders set their own rules and can consider a wider range of financial situations.
More financing paths. Portfolio loans can support home-only purchases or combined home-and-land financing, depending on eligibility.
Tailored loan terms. Rates and terms can be adjusted based on your overall financial picture.
One lender throughout. The same lender services the loan from start to finish, making communication and support more straightforward.
Rates may be higher. Lender-specific guidelines can lead to higher interest rates.
Less uniform requirements. Terms, eligibility, and pricing differ widely, making comparison shopping more important.
Down payment needs may change. Some lenders may require a larger down payment depending on credit, loan amount, or property type.
Not tied to government protections. Not government-insured and may not follow the same standardized guidelines.
A new home begins with the right plan.
Choosing a loan is easier with the right information and support. Our Clayton Homes financing education resources can help you understand your options and determine what fits your budget. And when you’re ready to move forward, you’ll be better equipped to take the next step with confidence. Drop by your local Clayton location or reach out to us anytime to get started with your home search.
This content is provided for educational purposes only and is not intended as financial, credit, or lending advice. Clayton Homes does not offer or originate mortgage loans and does not make credit decisions. Financing terms, loan programs, rates, and eligibility requirements vary by lender and may depend on buyer qualifications, property type, and location. Buyers should consult a licensed lender of their choice for information regarding available financing options.
