1. Conventional: flexible, but lender underwriting still matters
A conventional loan is not insured by a specific federal mortgage program. CFPB notes that conventional loans often cost less than FHA for some borrowers, while underwriting may be more demanding.
Some conventional programs allow low down payments. When the down payment is below 20%, private mortgage insurance may apply depending on the loan.
2. FHA: lower down-payment entry, with mortgage insurance
CFPB and HUD describe FHA loans as private-lender mortgages insured by the Federal Housing Administration. FHA purchase financing can allow down payments as low as 3.5% for eligible borrowers and properties.
FHA mortgage insurance is part of the cost structure, so compare the full payment and cash to close rather than treating the smaller down payment as the entire decision.
3. VA: a benefit for eligible borrowers, not a universal program
VA-backed purchase loans are available only to borrowers who meet VA eligibility and lender requirements. VA states that qualifying purchase loans can offer no down payment when program conditions are met and do not require monthly mortgage insurance.
A one-time VA funding fee often applies unless the borrower is exempt. The fee can vary with loan type, benefit use and down payment, so use the current VA schedule and the lender's Loan Estimate.
4. Compare the same transaction, not three marketing headlines
Ask lenders to quote the same purchase price, down-payment scenario and term. CFPB recommends comparing standardized Loan Estimates because they show loan type, payment, mortgage insurance, closing costs and estimated cash to close.
A program that minimizes cash upfront may cost more over time; another may require more cash but reduce recurring insurance or fees. The tradeoff depends on the borrower and the loan offer.
5. Treat preapproval as a financing status, not a guarantee
A preapproval or reported financing status is not final loan approval. The lender still evaluates the borrower, documentation, property, appraisal and program requirements.
Use real-estate guidance to narrow the property search, but leave qualification and final loan structure to the lender.
Common questions
Is FHA always cheaper for a low down payment?
No. CFPB recommends comparing real Loan Estimates because credit profile, mortgage insurance, fees and current lender pricing can change the result.
Does VA always mean zero down?
VA-backed purchase loans can offer no down payment when eligibility, entitlement, appraisal and lender requirements are satisfied; the lender determines the actual approved structure.
Which loan should I choose?
That decision requires lender-specific offers. Compare Loan Estimates for the same transaction and evaluate cash to close, total payment, insurance and fees.