In basic terms, any mortgage that is not insured by the federal government. Fixed and adjustable rate
mortgages are both considered conventional. These loan types may be conforming or non-conforming, with
conforming defined by government-sponsored entities Fannie Mae and Freddie Mac. A major factor that
helps determine if a mortgage is conforming is the amount of the loan. If it’s above the conforming
loan limit, it is then labeled a jumbo mortgage and will result in a higher rate.
Typically conventional mortgages result in higher down payment than those of government loans, and if
the loan-to-value ratio is greater than 80 percent, mortgage insurance is required by the lender.
FHA Mortgage (Federal Housing Administration)
FHA loans are government-backed, which is designed to protect lenders against defaults, which in turn
makes it possible to offer borrowers lower interest rates. The FHA is not actually lending the money
to borrowers and they do not set the interest rates on FHA loans, they are simply the insurer of the
With a FHA loan, the down payment can be as low as 3.5% of the purchase price of the home.
VA Mortgage (Veterans Administration)
A mortgage that is guaranteed by the Veterans Administration. It was signed in to law by President
Franklin D. Roosevelt in 1944. VA loans provide veterans and/or their surviving spouses with a 100%
financing (zero down payment) under a federally guaranteed mortgage. Because of the requirements laid
out by FHA and conventional lenders, it’s one of the few places a one can buy a house with zero down.
Better known as the GI Bill, this program has been highly successful and has helped millions of American
veterans and their families acquire a home.
(1) The interest on the portion of the credit extension that is greater than the fair market value of
the dwelling is not tax deductible for Federal income tax purposes; and
(2) the consumer should consult a tax adviser for further information regarding the deductibility of
interest and charges