2025 guide to the best types of mortgages
Buying a Massachusetts home is one of the biggest financial decisions you’ll ever make, and unless you’re paying cash, choosing the right mortgage is crucial. With so many options available, figuring out the best type of loan can feel overwhelming. The truth is, the “best” loan depends on your financial situation, long-term goals, and how long you plan to stay in the home.
Let’s break down the most common types of home loans—and which one might be right for you.
1. Conventional Loans – best for buyers with strong credit
What it is:
A conventional loan is not backed by the government and typically comes with lower interest rates and fewer fees if you have good credit.
Pros:
- Lower interest rates with good credit
- Can be used for primary homes, vacation homes, or investment properties
- Options for as little as 3% down for qualified buyers
Cons:
- Requires a higher credit score (usually 620 or above)
- May require private mortgage insurance (PMI) if your down payment is under 20%
Best for:
Buyers with solid credit and steady income who can afford a moderate to large down payment.
2. FHA Loans – best for first-time homebuyers
What it is:
Federal Housing Administration or FHA loans are designed to help people with less-than-perfect credit or limited savings and they are backed by the Federal Housing Administration
Pros:
- Low down payment (as little as 3.5%)
- More flexible credit score requirements (as low as 580)
- Easier qualification standards
Cons:
- Mandatory mortgage insurance premium (MIP) for the life of the loan
- Loan limits vary by location
Best for:
First-time buyers or those with low credit scores and smaller down payments.
3. VA Loans – best for veterans and active-duty military
What it is:
Veteran Affairs or VA loans are available to eligible service members, veterans, and their spouses and are backed by the U.S. Department of Veterans Affairs
Pros:
- No down payment required
- No private mortgage insurance (PMI)
- Competitive interest rates
Cons:
- Only available to those who qualify based on military service
- Funding fee (which can be rolled into the loan)
Best for:
Eligible veterans, active-duty service members, and surviving spouses.
4. USDA Loans – best for rural homebuyers
What it is:
U.S. Department of Agriculture or USDA loans help buyers in eligible rural and suburban areas and are backed by the U.S. Department of Agriculture.
Pros:
- No down payment required
- Low mortgage insurance costs
- Competitive interest rates
Cons:
- Only available in USDA-eligible areas
- Income limits apply
Best for:
Buyers looking in rural or semi-rural areas who meet income requirements.
5. Adjustable-Rate Mortgages (ARMs) – best for short-term buyers
What it is:
ARMs have an interest rate that starts low and adjusts over time, usually after an initial fixed period (e.g., 5, 7, or 10 years).
Pros:
- Lower initial interest rate
- Good for short-term homeownership or refinancing plans
Cons:
- Rate can increase significantly after the initial fixed period
- Unpredictable monthly payments after adjustment
Best for:
Buyers who plan to move or refinance before the adjustable period kicks in.
So, which loan is right for you?
Ask yourself:
- Do I have strong credit?
- How much can I afford for a down payment?
- Am I eligible for government-backed loans?
- How long do I plan to live in the home?
For most Massachusetts buyers, a conventional loan is the best choice if you qualify. If not, FHA or VA loans offer great alternatives depending on your situation.
Buying a house is a big step—but with the right loan, it becomes a smart investment in your future.
Conclusion
Not sure which mortgage is right for you? Talk to one of our licensed mortgage professionals who can walk you through your options and help you get pre-approved.
Whether you’re just starting to explore or ready to make an offer, we’re here to help you take the next step toward homeownership.
This article is for informational purposes only. Loan Programs may have additional restrictions or requirements.
