Conventional vs FHA vs VA vs USDA: the four loan types compared

Almost every U.S. mortgage falls into one of four families. The names describe who stands behind the loan — and that determines the down payment, the insurance and the rules you live under.

The comparison

	Conventional	FHA	VA	USDA
Backed by	Fannie Mae / Freddie Mac (or lender portfolio)	Federal Housing Administration (HUD)	Department of Veterans Affairs	USDA Rural Development
Who qualifies	Anyone meeting guidelines	Anyone; primary residence	Eligible veterans, service members, some surviving spouses	Buyers in eligible rural/suburban areas within income limits
Minimum down	3%–5%	3.5% (580+)	0%	0%
Credit floor	620	500–580	None by VA (lender 580–620)	None by USDA (lender ~640)
Mortgage insurance	PMI until 78–80% LTV	1.75% upfront + annual MIP (life of loan under 10% down)	None; funding fee 1.25%–3.3% (waived for disabled veterans)	1% upfront guarantee fee + 0.35% annual
Loan limits	Conforming limits by county	FHA limits by county (lower)	None with full entitlement	Set by income/area; no fixed cap
Property	Primary, second home, investment; 1–4 units	Primary only; stricter condition standards	Primary only; VA appraisal with minimum property requirements	Primary only; eligible area; modest size
Seller concessions	3%–9% by LTV	6%	4% + closing costs	6%

Who each loan is for

Conventional suits borrowers with a 680+ score and at least 3% to 5% down, anyone buying a second home or investment property, and anyone who wants mortgage insurance that ends. FHA suits lower credit scores, higher debt ratios, and recent credit events; it is the most forgiving on people and the strictest on property condition. VA is, for those eligible, almost always the best loan available: no down payment, no monthly insurance, competitive rates, and a funding fee that can be financed. USDA is the quiet option for moderate-income buyers outside metro cores — many suburbs qualify — with zero down and cheap insurance, subject to income limits of roughly 115% of area median.

Switching later

FHA borrowers typically refinance to conventional once they reach 20% equity to drop MIP. VA borrowers can use the streamlined IRRRL to lower their rate without an appraisal. USDA offers a streamlined-assist refinance. None of the government loans can be converted to an investment property loan; they require owner occupancy at origination, though you may later move out and rent in most cases.

Frequently asked questions

Which loan has the lowest rate?

VA and FHA rates are often slightly lower than conventional for the same borrower because the government guarantee reduces the lender’s risk; the all-in cost including insurance and fees decides which is cheaper, and that depends on your credit score and down payment.

Can I use FHA or VA for a duplex?

Yes — both allow two-to-four unit properties if you occupy one unit, and rental income from the others may help you qualify. This is a classic first-step strategy for future investors.

Can a seller refuse FHA or VA offers?

Sellers may prefer conventional offers because of appraisal condition standards and the perception of delays, but a blanket refusal based on the buyer’s loan type is not illegal in most places. A strong pre-approval and a knowledgeable agent narrow the gap.