Picture this: you’re sitting across from a lender in Richmond, Virginia, and they’re rattling off terms like “conventional,” “FHA,” “VA,” “USDA,” “jumbo,” and “DSCR.” You nod along, but inside you’re wondering which of these actually applies to you — and whether picking the wrong one could cost you money you don’t have to spend. It’s one of the most common moments in the homebuying process, and it’s completely understandable to feel lost.
Here’s what that moment deserves: a straight answer. The mortgage loan type you choose is one of the most consequential financial decisions you’ll make. It affects your down payment, your monthly payment, whether you pay mortgage insurance, how long approval takes, and potentially tens of thousands of dollars over the life of the loan. Choosing the right loan type can unlock zero-down financing, eliminate private mortgage insurance years earlier, or open doors that a bank turned you away from.
This guide breaks down every major mortgage loan type available to buyers in Virginia — and for borrowers in Florida, Tennessee, and Georgia — in plain English. You’ll find a structured comparison table, worked math examples with full arithmetic, a decision framework, and a structured FAQ. No jargon left unexplained. No vague “it depends” answers without the actual variables spelled out.
Duane Buziak, Mortgage Maestro (NMLS#1110647), licensed in VA, FL, TN, and GA, has structured this guide to give you exactly what you need to walk into any conversation with a lender — or to start one — knowing which loan type belongs in your corner.
Government-Backed vs. Conventional: The Fundamental Split
Every mortgage falls into one of two broad categories: government-backed or conventional. Understanding this distinction is the foundation for everything else.
Government-backed loans are insured or guaranteed by a federal agency. If a borrower defaults, the agency steps in to cover the lender’s loss. That guarantee allows lenders to accept lower credit scores, smaller down payments, and higher debt-to-income ratios than they otherwise would. The three main government programs are FHA (Federal Housing Administration), VA (Department of Veterans Affairs), and USDA (U.S. Department of Agriculture).
Conventional loans are not government-backed. They’re originated by private lenders and typically sold to Fannie Mae or Freddie Mac on the secondary market. Because there’s no federal guarantee, qualification standards are generally stricter — but for borrowers who qualify, conventional loans often carry lower long-term costs, particularly around mortgage insurance.
The 2025 conforming loan limit for most U.S. counties is $806,500 for a one-unit property, as established by the FHFA. (Verify the current limit at fhfa.gov.) Conventional loans at or below this threshold are called “conforming.” Loans above it are “jumbo” — a separate category with its own rules. For buyers in Short Pump, Glen Allen, Henrico, and Chesterfield, where median home prices have been reported in the $390,000–$430,000 range in recent periods, most purchases fall well within conforming limits. In Charlottesville and Albemarle, where prices run higher, jumbo territory becomes a real consideration.
The table below summarizes the key structural differences across loan types:
Loan Type Comparison Table
FHA Loan | Backer: HUD/FHA | Min Credit Score: 580 (500 with 10% down) | Min Down Payment: 3.5% | Mortgage Insurance: Upfront MIP 1.75% + annual MIP | Best For: Lower credit scores, first-time buyers
VA Loan | Backer: Dept. of Veterans Affairs | Min Credit Score: Varies by lender (often 580–620) | Min Down Payment: 0% | Mortgage Insurance: None (funding fee applies) | Best For: Veterans, active military, surviving spouses
USDA Loan | Backer: USDA Rural Development | Min Credit Score: Typically 640+ | Min Down Payment: 0% | Mortgage Insurance: Upfront guarantee fee + annual fee | Best For: Rural/suburban buyers within income limits
Conventional Conforming | Backer: None (Fannie/Freddie purchase) | Min Credit Score: 620+ (best pricing at 740+) | Min Down Payment: 3% | Mortgage Insurance: PMI (cancels at 80% LTV) | Best For: Stronger credit profiles, long-term cost efficiency
Jumbo | Backer: None | Min Credit Score: Typically 700–720+ | Min Down Payment: 10–20%+ | Mortgage Insurance: Typically none | Best For: Loan amounts above $806,500
Non-QM (Bank Statement / DSCR) | Backer: None | Min Credit Score: Varies (often 620–680+) | Min Down Payment: 10–20%+ | Mortgage Insurance: Typically none | Best For: Self-employed, investors, complex income
FHA, VA, and USDA Loans: Side-by-Side Qualification Criteria
Government-backed programs each serve a different borrower profile. Here’s what you actually need to qualify for each one, and why each matters in specific Virginia communities.
FHA Loans
FHA loans are insured by the Federal Housing Administration and are administered through HUD. Per HUD guidelines, borrowers with a credit score of 580 or higher can put as little as 3.5% down. Borrowers with scores between 500 and 579 can still qualify, but are required to put 10% down. Scores below 500 are not eligible for FHA financing.
Every FHA loan carries two layers of mortgage insurance premium (MIP): an upfront MIP of 1.75% of the base loan amount, which is typically rolled into the loan, and an annual MIP that varies based on loan term, LTV, and loan amount. For most 30-year FHA loans with less than 10% down, annual MIP is currently around 0.55% of the loan balance, paid monthly. Critically, FHA MIP on loans with less than 10% down now remains for the life of the loan — it does not automatically cancel when you reach 80% LTV.
FHA is frequently the path forward for Richmond, Fredericksburg, Stafford, and Prince William buyers who were turned down by a bank or credit union due to credit history or limited down payment savings. Understanding the full FHA loan requirements before you apply can save you significant time and frustration in the approval process.
VA Loans
VA loans are guaranteed by the Department of Veterans Affairs and are available to eligible veterans, active-duty service members, and qualifying surviving spouses. Per VA.gov, VA loans require zero down payment, carry no private mortgage insurance, and offer competitive rates. In place of PMI, VA loans charge a one-time funding fee that varies based on service type, down payment amount, and whether it’s the borrower’s first VA loan use. The funding fee can be financed into the loan amount.
For the large veteran and active-duty communities in Williamsburg, Yorktown, Hampton Roads, Newport News, and Virginia Beach, the VA loan benefits are typically the first program to evaluate. The combination of zero down and no monthly PMI represents a substantial long-term savings advantage for those who qualify.
USDA Loans
USDA Rural Development loans offer zero down payment financing for properties in eligible rural and suburban areas, subject to household income limits. In Virginia, historically USDA-eligible zones have included parts of Goochland, Louisa, Caroline County, Hanover, Stafford, and Spotsylvania. Eligibility is property-specific and changes periodically, so always verify current eligibility at the USDA eligibility map tool.
USDA loans carry a 1% upfront guarantee fee (typically financed) and an annual fee of approximately 0.35% of the outstanding balance. Credit score requirements are generally 640+, though some lenders will manually underwrite below that threshold. Buyers in qualifying areas should review USDA loan benefits in detail to understand how this zero-down program compares to FHA on total cost.
Sample Monthly Payment Comparison (Illustrative — Not a Rate Quote)
Assumptions: $280,000 purchase price, zero or minimum down, 6.75% illustrative rate, 30-year term. These figures are for comparison purposes only. Actual rates and payments will vary.
FHA: Loan amount $276,300 (after 3.5% down of $9,800 + upfront MIP of $4,785 financed) | Est. P&I: ~$1,793/month | Annual MIP (~0.55%): ~$127/month | Est. Total: ~$1,920/month
VA: Loan amount $280,000 (zero down, funding fee financed separately) | Est. P&I: ~$1,816/month | No monthly PMI | Est. Total: ~$1,816/month
USDA: Loan amount $282,800 (1% guarantee fee financed) | Est. P&I: ~$1,834/month | Annual fee (~0.35%): ~$82/month | Est. Total: ~$1,916/month
These are illustrative estimates for educational comparison only. Actual rates, fees, and payments depend on individual qualification factors and current market conditions. Not a commitment to lend.
Conventional and Jumbo Loans: When Standard Programs Are the Smart Play
For buyers with stronger credit profiles and stable W-2 income, conventional loans often deliver better long-term value than government-backed alternatives — even when the rate looks similar at first glance.
Conventional Conforming Loans
Conventional loans backed by Fannie Mae or Freddie Mac are available with as little as 3% down through programs like Fannie Mae HomeReady and Freddie Mac Home Possible, which target moderate-income borrowers. Unlike FHA MIP, conventional PMI can be cancelled once your loan balance reaches 80% of the original appraised value — and lenders are required by federal law (Homeowners Protection Act) to automatically cancel it at 78% LTV. Buyers weighing their options should explore low down payment mortgage strategies to understand which program structure best fits their financial profile.
This PMI cancellation right is one of the most important structural differences between FHA and conventional. Here’s the breakeven math, worked in full:
Breakeven Example: FHA vs. Conventional — $350,000 Purchase, 5% Down, 700 Credit Score
Down payment: $17,500. Base loan amount: $332,500.
FHA path: Upfront MIP = 1.75% × $332,500 = $5,818.75 (financed, making loan ~$338,319). Annual MIP at approximately 0.55% = $1,828.75/year = approximately $152/month. FHA MIP on this loan continues for the life of the loan because LTV starts above 90%.
Conventional path: No upfront fee. PMI at approximately 0.65% annually on $332,500 = $2,161/year = approximately $180/month. However, PMI cancels when balance reaches $280,000 (80% of $350,000). At a 6.75% illustrative rate, that takes approximately 8–9 years of normal payments.
Breakeven verdict: In the early years, FHA’s monthly MIP ($152) is lower than conventional PMI ($180) by about $28/month. But FHA MIP never cancels on this loan. After approximately 9 years, the conventional borrower eliminates PMI entirely. Over a 30-year horizon, the conventional borrower saves substantially — even accounting for the slightly higher early PMI payments. The crossover point depends on how long you keep the loan, but buyers planning to stay more than 7–10 years in Chesterfield, Midlothian, or Henrico should run this comparison carefully.
Jumbo Loans
Any loan exceeding $806,500 in most Virginia counties triggers jumbo status, requiring portfolio lender financing rather than Fannie/Freddie purchase. Jumbo guidelines typically require credit scores of 700–720 or higher, reserves of 6–12 months of PITI (principal, interest, taxes, insurance), and down payments of 10–20% or more. For buyers in Charlottesville, Albemarle, and higher-price segments of Virginia Beach and Chesapeake, jumbo loan rates and qualification requirements are a real part of the conversation.
Illustrative Rate and Payment Reference Table (Educational Only — Not a Rate Quote)
FHA 30-Year: Illustrative rate range 6.50–7.00% | Key APR factors: MIP adds to effective cost | Monthly P&I on $400k loan: ~$2,528–$2,661
Conventional 30-Year: Illustrative rate range 6.375–6.875% | Key APR factors: PMI varies by score/LTV | Monthly P&I on $400k loan: ~$2,494–$2,627
VA 30-Year: Illustrative rate range 6.00–6.625% | Key APR factors: Funding fee, no PMI | Monthly P&I on $400k loan: ~$2,398–$2,527
Jumbo 30-Year: Illustrative rate range 6.50–7.25% | Key APR factors: Portfolio lender pricing | Monthly P&I on $400k loan: ~$2,528–$2,728
Rates are illustrative ranges for educational purposes only. Actual rates depend on creditworthiness, loan amount, property type, and market conditions at time of application. Use the CFPB rate explorer to compare current market rates. Not a commitment to lend.
Non-QM Loans: Solutions for Self-Employed Borrowers and Investors
Not every borrower fits inside the Fannie/Freddie box. For self-employed business owners, real estate investors, and borrowers with complex income structures, non-QM (non-qualified mortgage) programs exist precisely to fill the gap that conventional and government-backed loans leave open.
Bank Statement Loans
Bank statement loans replace W-2s and tax returns with 12–24 months of personal or business bank statements. The lender averages monthly deposits over the statement period to establish qualifying income. If a Richmond-area business owner deposits an average of $15,000/month over 24 months, that becomes the income basis — regardless of what their Schedule C shows after deductions.
This matters because self-employed mortgage options in Virginia often show lower taxable income on paper than their actual cash flow supports. A conventional or FHA lender using tax returns would decline them. A bank statement loan lender uses actual deposits. Banks and credit unions almost universally cannot offer this product because it falls outside agency guidelines — it requires a wholesale or non-QM investor relationship. This program is particularly relevant for self-employed borrowers in Richmond, Roanoke, Lynchburg, and Lake Anna who have been told “no” by their local bank.
DSCR Loans for Real Estate Investors
Debt-Service Coverage Ratio (DSCR) loans qualify the property, not the borrower’s personal income. The formula is straightforward:
DSCR = Monthly Gross Rent ÷ Monthly PITIA (Principal + Interest + Taxes + Insurance + Association dues)
Most DSCR lenders want a ratio of 1.0 to 1.25 or higher. Here’s a worked example:
Investment property monthly rent: $1,800. Monthly PITIA: $1,400. DSCR = $1,800 ÷ $1,400 = 1.29. This clears the typical 1.25 threshold. No W-2, no tax returns, no personal income verification required — the property’s cash flow carries the qualification.
For Virginia and Florida real estate investors building portfolios in Richmond, Hampton Roads, or coastal Florida markets, DSCR financing allows scaling without the personal income documentation bottleneck that stops conventional financing after the first few properties.
ITIN and Alternative Income Programs
For borrowers who file taxes using an Individual Taxpayer Identification Number rather than a Social Security number, ITIN loan programs provide a path to homeownership that traditional bank products typically cannot accommodate. Documentation requirements vary by lender but often include ITIN tax returns, bank statements, and employment or business verification. Similarly, stated income and asset-depletion programs serve borrowers with significant assets but limited documentable income — retirees and high-net-worth individuals being common examples.
Access to hundreds of wholesale lenders is what makes these programs available. A single retail lender or bank has one product menu. An independent mortgage broker can match a complex borrower’s profile against dozens of non-QM investors simultaneously, finding the program that fits rather than the program that’s available.
How Lender Structure Shapes Your Options: A Direct Comparison
The type of lender you work with is just as important as the loan type you’re seeking. Here’s a structured Q&A that addresses the questions borrowers in Virginia ask most often about lender differences.
Q: Can Rocket Mortgage offer me a bank statement loan?
A: Rocket Mortgage is a retail direct lender that funds loans from its own capital using its own product menu. Bank statement loans are non-QM products that fall outside agency guidelines. Retail direct lenders typically do not offer them because they require wholesale non-QM investor relationships. If bank statement income is your path to qualification, a broker with non-QM investor access is the more productive conversation.
Q: Does Movement Mortgage shop multiple investors for my rate?
A: Movement Mortgage is a retail direct lender. It prices loans against its own cost of funds and investor relationships. It does not simultaneously shop your file across dozens of competing wholesale lenders the way an independent broker does. That’s not a criticism — it’s a structural description. Both models serve borrowers; they just operate differently.
Q: What happens if my credit score is 520 and PrimeLending declines me?
A: PrimeLending, like most retail lenders, has minimum score requirements that align with agency guidelines. A 520 score falls below FHA’s 580 threshold for 3.5% down, and below most conventional minimums. However, some non-QM investors work with scores in the 500s with compensating factors, and FHA technically allows 10% down at 500–579. Understanding your credit score requirements for a mortgage across different programs can help you identify which wholesale investors will consider your file and under what conditions, rather than simply accepting a decline.
The broker advantage — with breakeven math:
Shopping hundreds of lenders simultaneously creates rate competition that a single institution cannot replicate. Here’s what a 0.25% rate difference means in real dollars on a $350,000 loan over 30 years:
Rate A (6.75%): Monthly P&I = approximately $2,270. Rate B (7.00%): Monthly P&I = approximately $2,329. Monthly difference: approximately $59. Annual difference: approximately $708. Over 30 years: approximately $21,240.
If the broker’s rate advantage costs $1,500 in origination to access (closing cost difference), the breakeven is $1,500 ÷ $59 = approximately 25 months. After that, every month is money saved. For buyers in Chesterfield, Midlothian, Stafford, or Virginia Beach planning to stay in their home, this arithmetic matters. Working with a trusted mortgage broker in Virginia gives you access to this rate competition across the full wholesale market.
NoTouch Credit — No Credit Hit Pre-Qualification:
Exploring loan types and getting pre-qualified does not require a hard credit inquiry. The soft credit pull mortgage pre-qualification process allows borrowers from Henrico to Hampton Roads to understand which loan types they qualify for, what rate range to expect, and how different programs compare — all without a single point of credit score impact. This is especially valuable during the comparison-shopping phase, when a borrower might be evaluating multiple lenders simultaneously.
Your Loan Type Decision Framework
Here’s a practical decision tree. Work through it in order, and you’ll arrive at the right starting point for your situation.
Step 1: Are you a veteran, active-duty service member, or qualifying surviving spouse? If yes, start with VA loan eligibility. Zero down, no PMI, and competitive rates make it the strongest program for those who qualify. Confirm eligibility at VA.gov.
Step 2: Is the property in a rural or suburban area of Virginia? Check USDA eligibility for Goochland, Louisa, Caroline County, Hanover, Stafford, and Spotsylvania. Zero down with modest annual fees. Verify the specific address at the USDA eligibility map.
Step 3: Is your credit score below 620? FHA becomes the primary agency option. Scores 580–619 qualify for 3.5% down. Scores 500–579 require 10% down per HUD guidelines. Below 500, non-QM is the path.
Step 4: Are you self-employed, an investor, or was your income documentation turned down? Bank statement loans, DSCR loans, or other non-QM programs are the right lane. Personal income verification is not required for DSCR; deposit averaging replaces W-2s for bank statement.
Step 5: Is the purchase price above $806,500? Jumbo financing applies. Plan for higher credit score requirements, larger reserves, and potentially larger down payments.
Step 6: If none of the above apply, compare FHA vs. conventional with the breakeven math. For buyers planning to stay long-term with credit scores above 680, conventional typically wins on total cost due to PMI cancellation.
Refinance / Loan-Type Switch Breakeven Example:
Suppose you currently have an FHA loan with monthly MIP of $180. Refinancing to a conventional loan eliminates MIP entirely. Closing costs on the refinance: $3,600. Understanding how to refinance your current mortgage step by step can help you execute this switch at the right time and maximize your savings.
Monthly savings: $180. Breakeven: $3,600 ÷ $180 = 20 months. If you plan to keep the loan beyond 20 months, the refinance pays for itself and continues saving money every month after. This is the arithmetic that drives many FHA-to-conventional refinances in the Richmond, Fredericksburg, and Hampton Roads markets.
Structured FAQ: Mortgage Loan Types in Virginia
Q1: What credit score do I need for each loan type in Virginia?
A: FHA requires a minimum 580 for 3.5% down (500–579 with 10% down, per HUD). VA loan credit score minimums vary by lender but are often 580–620. USDA typically requires 640+. Conventional conforming loans start at 620, with best pricing at 740+. Jumbo loans generally require 700–720+. Non-QM programs vary widely, with some accepting 580 and others requiring 660+.
Q2: Can I get pre-qualified without a hard credit pull?
A: Yes. The NoTouch Credit soft-pull pre-qualification process reviews your credit profile without triggering a hard inquiry. Your credit score is not impacted. This allows you to explore loan types, understand your rate range, and compare programs before committing to a formal application.
Q3: What is the difference between FHA and conventional loans?
A: FHA loans are government-insured, carry mandatory MIP (including for the life of the loan in most cases), and accept lower credit scores and smaller down payments. Conventional loans are not government-backed, have PMI that cancels at 80% LTV, and typically offer better long-term cost for borrowers with stronger credit. The right choice depends on your credit score, how long you plan to keep the loan, and available down payment.
Q4: Are USDA loans available in Richmond or Chesterfield?
A: The City of Richmond and most of Chesterfield County’s urban core are generally not within USDA-eligible zones. USDA eligibility is more common in the outer suburban and rural areas — Goochland, Louisa, Caroline County, parts of Hanover, Stafford, and Spotsylvania. Always verify the specific property address at the USDA eligibility map tool, as boundaries change periodically.
Q5: What loan options exist if I’m self-employed or was turned down by my bank?
A: Bank statement loans (12–24 months of deposits used as income documentation) and DSCR loans (for investment properties, qualifying on rental income rather than personal income) are the primary non-QM solutions. ITIN programs and asset-depletion loans cover additional complex scenarios. These programs require wholesale non-QM investor access that most retail banks and credit unions do not have — an independent broker relationship is typically the most efficient path to these products.
Putting It All Together: Your Next Step
No single mortgage loan type is universally best. The right program depends on your military status, credit profile, property location, income documentation type, purchase price, and how long you plan to keep the loan. A veteran buying in Virginia Beach almost certainly starts with VA. A self-employed investor in Richmond starts with bank statement or DSCR. A first-time buyer in Stafford with a 590 credit score starts with FHA and a roadmap toward conventional. A buyer in Charlottesville at $850,000 starts with jumbo.
What makes the difference between finding the right loan and settling for the available loan is access. An independent mortgage broker with relationships across hundreds of wholesale lenders can match your specific profile to the program that fits — not just the one on the shelf. That’s the structural advantage of working with a broker rather than a single retail institution.
The NoTouch Credit soft-pull pre-qualification means you can start that process today without any impact to your credit score. Understand your options, compare programs, and make an informed decision — before you’re sitting across from anyone asking you to sign anything.
Learn more about our services and explore which mortgage loan type fits your situation in Virginia, Florida, Tennessee, or Georgia.
Rates shown in this article are illustrative and for educational purposes only. Actual rates depend on creditworthiness, loan amount, property type, and market conditions at time of application. Loan program availability is subject to lender guidelines and borrower qualification. This article is not a commitment to lend. All borrowers should verify current program guidelines with a licensed mortgage professional. USDA and VA eligibility must be confirmed through the respective agency tools. Equal Housing Lender.
Author: Duane Buziak, Mortgage Maestro | NMLS: 1110647 | Licensed in VA · FL · TN · GA | VA Broker of the Year 2024–2025 | Top 1% Nationwide | Coast2Coast Mortgage | DuaneBuziakMortgageMaestro.com | (804) 212-8663
