The best loan type depends on your military status, credit score, savings, and how long you plan to stay in the home.
VA loans are the best option for eligible veterans (zero down, no mortgage insurance). Conventional loans are best for buyers with 660+ credit and some savings (PMI drops off at 80% equity). FHA loans are best for buyers with lower credit scores (580+ accepted, 3.5% down). USDA loans are best for eligible rural/suburban areas (zero down).
The only way to know your best option is to compare all four side by side with your specific numbers.
The Quick Decision Framework
Here is a simple step-by-step way to narrow down your options:
- Step 1: Are you a veteran or active military? If yes, start with VA.
- Step 2: Are you buying in a USDA-eligible area with income below the limit? If yes, compare USDA.
- Step 3: Is your credit score below 660? FHA is likely your best option.
- Step 4: Is your credit 660+ with savings for 3-5% down? Compare conventional.
VA: The Gold Standard for Eligible Buyers
If you are a veteran, active-duty service member, or qualifying spouse, the VA loan is almost always your best option. Here is why:
- Zero down payment required
- No mortgage insurance (saves hundreds per month)
- Lowest rates of any loan program
- A funding fee applies (1.25-3.3%) but can be waived with a service-connected disability
- No VA loan limit with full entitlement
If you are eligible, always explore VA first. It is hard to beat a zero-down loan with no mortgage insurance and the lowest interest rates available.
Conventional: Best Long-Term Value for Good Credit
Conventional loans are the most common option for buyers with solid credit and some savings:
- 3-5% down payment options available
- PMI (private mortgage insurance) drops off automatically at 80% equity
- Better long-term cost than FHA for buyers with 660+ credit
- Two types: conforming (under $766,550 in 2024) and jumbo (above that limit)
FHA: The Accessibility Champion
FHA loans are government-insured and designed to help buyers with lower credit scores or limited savings:
- 3.5% down payment with a 580+ credit score (10% down if below 580)
- More flexible debt-to-income ratios than conventional
- Mortgage insurance (MIP) stays for the life of the loan in most cases
- Lower barrier to entry but higher long-term cost than conventional
USDA: Zero Down in Eligible Areas
USDA loans are for buyers purchasing in designated rural and suburban areas:
- Zero down payment required
- Low guarantee fee (about 1% upfront + 0.35% annual)
- Income limits apply based on household size and location
- Many San Antonio suburbs and surrounding Hill Country areas qualify
Side-by-Side Comparison
Here is a quick snapshot of how the four major loan types compare:
| VA | Conventional | FHA | USDA | |
|---|---|---|---|---|
| Down Payment | 0% | 3-5% | 3.5% | 0% |
| Credit Score | No VA min | 620+ | 580+ | No USDA min |
| Mortgage Insurance | None | PMI (drops at 80%) | MIP (life of loan) | Low annual fee |
| Best For | Veterans | Good credit | Lower credit | Rural areas |
Why You Should Compare Multiple Options
Running all four scenarios with the same purchase price and credit score can reveal dramatic differences. The gap between the best and worst option for the same buyer can be $200 to $400 per month.
That is not a small difference. Over a 30-year loan, choosing the wrong loan type could cost you tens of thousands of dollars. The right loan type is the one that fits your specific situation, not the one your friend used or the one you heard about on social media.